Fostering a culture of trust in the financial industry A second growing focus in the supervisory agenda is to help foster a culture that motivates the right ethical behaviour and responsible risk-taking in our financial institutions and markets. But it will require different and novel approaches because there are limits to what externally imposed rules can do to promote the right values in financial firms. The financial industry continues to be plagued by egregious misconduct, nine years on from the global financial crisis. In the US and UK, major retail banks are still settling charges against them for mis-selling investment and insurance products in the run-up to the financial crisis. Across financial centres, traders at several banks were found to be involved in flagrant manipulation of key financial benchmarks. Internationally, regulators have been cracking down on illicit fund flows, with several financial institutions being penalised for lapses in money laundering controls. In Singapore, we have taken decisive actions against financial institutions that fell short of our anti-money laundering standards. MAS shut down two banks and fined several others, and culpable individuals have been charged in court and sentenced. Reform of the financial industry will not be complete until this issue of trust and ethics is addressed. We need to “get the culture right”. This will require collective effort by regulators, the industry, and financial institutions. The FSB and IOSCO have been driving international efforts to reduce misconduct risk, focusing on governance and incentive structures, conduct standards in wholesale markets, and the reform of financial benchmarks.

In addition, their profitability will help enhance their capital base over time. Last but not least, inflationary pressure is stable due to a substantial fall in oil price from last year. Headline inflation, though currently in negative territory, is expected to gradually rise, and turn positive in 2016. Deflationary risks remain contained as demand continues to expand, and prices of most non-energy items remain stable or trend upwards. Such inflation trajectory is consistent with medium-term expectations of the public and the Bank of Thailand’s medium-term inflation target. Overall, the economy and our financial system show a good sign of stability and resiliency. BIS central bankers’ speeches  3  Let me now turn to implications for the real economy and begin by giving you some positive news, that is, the economy is likely to register stronger growth momentum next year. Tourism continues to show good prospects where the number of tourist arrivals is likely to exceed 30 million in 2016. Fiscal stimulus will continue to be a key growth driver. Public expenditure is expected to increase by more than 200 billion Baht from this year, providing support to the economic recovery, especially the construction sector. In the private sector, there are signs of investment expansion in construction, telecommunications, and alternative energy, among others. Although we may see export contraction in 2015, there are resilient spots in certain sectors. Exports to CLMV economies have experienced strong growth, and continue to show great potentials from which Thailand could capitalize.