The issue is with the barrels in which they are stored.20 Leaders and senior managers must be personally responsible for setting the cultural norms of their institutions. But in some parts of the financial sector the link between seniority and accountability had become blurred and, in some cases, severed. The public were rightly angered that so many of the leaders and senior managers who were responsible for sowing the seeds of the crisis and for allowing cultures to develop in which gross misconduct took place have walked away from their actions or inactions. In the UK, Parliament has established a stronger regulatory framework to allocate responsibilities to individual executives and board members and to give regulators the tools to hold them to account. The excuse of having delegated a responsibility simply will not wash. The public bail outs and the fact that few of the consequences of scandal have been borne by those who were directly responsible revealed a great deal about the balance of risk and rewards for those who worked in in financial services. Compensation schemes overvalued the present and heavily discounted the future, encouraging imprudent risk taking and short-termism. To align better incentives with the long-term interests of the firm – and, more broadly, society – major changes have been made. At the request of G20 Leaders, the FSB has developed principles and standards for sound compensation practices. 19  Chart 13 shows the sharp increase since 2010 in the number of FICC-related misconduct fines.

Countries with stronger macroeconomic fundamentals experience less volatile capital flows and are therefore less disrupted by them. “Fragile five” episode was a case in point for the market to differentiate countries, with high current account deficits and high inflation as the focal point. In most cases, strong macroeconomic fundamentals include both internal and external fronts. Internal front involves improved fiscal discipline, banking system with prudent supervisory and regulatory frameworks, stabilized inflation, wellequipped financial markets, and credible monetary policy framework. External front includes sufficiently flexible exchange rate, adequate foreign reserves, and manageable external debt levels. In addition, well-diversified sources of finance among bank-based, debt and equity markets would be supportive of financial stability. Concluding remarks 4  BIS central bankers’ speeches  Ladies and Gentlemen, I have spoken at length, from the subject of global volatility, onto more policy options issue based on central banks’ perspectives. Let me now wrap up by leaving you with a final remark on these issues. In the world of increased financial integration, volatility of capital flow and exchange rate is unavoidable. A sustainable path forward requires going beyond coping with capital flows to living with them. Therefore, public and private stakeholders must remain vigilant of any impacts they may have on real economy. Thailand’s approach so far has been to allow the exchange rate to act as an automatic stabilizer, while its extreme movements are carefully managed. At the same time, reforms are actively pursued with the economy’s long-term resilience as our ultimate goal.