The authorities therefore need to be mindful of the inherent risks associated with new financial instruments and practices. To promote growth and financial stability sound macroeconomic and prudential policics are required, as well as vigilance in the supervision and regulation of markets and intermediaries. These include being better prepared to withstand increased volatilities in financial markets and improving the structural resilience of the financial system. As we all know, the cost of financial instability can be grave not only for the country in which thc financial turmoil emerges, bot also for the international financial system as a whole. We saw this in the Mexican crisis in 1994/95 and again in the Asian crisis in 1997/98 where international investors’ confidence was undermined thus imposing significant economic and social costs in all affected countries. The globalisation of markets and the increasing importance of financial stability have prompted central banks to be active and vigilance in guarding against instability. The increased focus on financial stability, is closely tied to the issue of globalisation, as events in one corner of the world can have unavoidable systemic impact on the other parts of the world. Promoting financial stability involves not only the promotion of macroeconomic stability, but also promoting a strong legal and regulatory framework that would support the development of deep and robust financial markets. This in turn would promote sound financial institutions and a stable overall infrastructure for the financial industry. In short, both the market and the intermediaries must be strong and efficient.

M R Pridiyathorn Devakula: Financial markets and new financial instruments Opening address by Mr M R Pridiyathorn Devakula, Governor of the Bank of Thailand, at the SEACEN-IMF Institute course on Financial Markets and New Financial Instruments, Bangkok, 6 September 2004. *  *  *  Dr. Subarjo Joyosumarto, Mr. Sunil Sharma, Distinguished Speakers and Participants, It is indeed a pleasure for me to be here this afternoon to officially open the SEACEN-IMF Institute Course on Financial Markets and New Financial Instruments. On behalf of the Bank of Thailand, I would like to extend a warm welcome to everyone of you to Bangkok. Today’s course is the second of three SEACEN courses that the Bank of Thailand plans to host this year. We are pleased to be given the opportunity to support the work of the SEACEN Centre, and all its member central banks. These series of courses are indeed most topical, as the global economic recovery gathers momentum, financial market activities also pick up, along with innovative financial practices and instruments. The IMF recently adjusted its forecast of global GDP from 4.6 percent to 4.9 percent, the highest growth rate in nearly three decades. Economic performance in Asia has also been in sharp contrast to the situations we faced four or five years ago, reflecting the synchronized recovery of the global economy. With the strong economic recovery comes the demands from firms and enterprises for more sophisticated and efficient services from their financial intermediaries. This is expected to happen in Asia as well.