These are actually some of the recurrent criticisms I have heard about the Eurosystem’s monetary policy: too obscure, too narrow-focused, too late. Figure 3 displays a forward-looking Taylor-type rule for the ECB’s minimum bid rate. As an overall assessment, the Taylor-type rule closely matches Eurosystem’s monetary policy decisions. Under the proviso that this rule provides a good benchmark, it is quite unclear why the Eurosystem has attracted so much criticism: in particular, the output stabilisation “objective”, as encapsulated in a standard Taylor rule, has not been overlooked by the overriding objective of price stability. In that regard, one should be aware that, in the euro area as elsewhere, price stability aims at providing the highest sustainable growth and employment in the longer run; finally, the decisions have been taken in a timely fashion, the Eurosystem conducting its monetary policy in a forward-looking and pre-emptive way. However, the same figure shows that policy decisions deviate from time to time from the Taylor rule benchmark. Actually, being rule-based doesn’t imply being rule-bound and monetary policy decisions are not taken on the basis of mechanical rules. I already mentioned the Eurosystem adopted a full-information approach, which besides the usual array of economic and financial indicators also gives a key role to monetary analysis not factored in usual Taylor rules. Figure 4 illustrates the importance of such an approach in the context of our monetary policy decisionmaking process.

If necessary, regulators may consider limiting the scope of non-auditing services or requiring the auditors to submit a request for approval prior to engaging in non-auditing activities in the same entity that they provide auditing service. One good example is the Sarbanes Oxeley Act, which was issued in the U.S. in 2002 disallowing audit firms from providing specifc functions to their audit clients such as bookkeeping, financial information system design and appraisal service, etc. Second, the work of the auditors should never replace supervisory responsibilities. Audited financial statements are not prepared to serve supervisory purposes and external auditors are not trained as bank supervisors. Accounting policies and definitions used by auditors may be different from those required by supervisors under Thai regulatory standards, although in general they tend to be the same. For example, there are differences between supervisory guidelines and accounting requirements on asset classification and provisioning. Whereas the supervisory guidelines prescribe minimum specific ratios of loan provisions depending on the quality of loans, the accounting standard is less specifc and only requires banks to set aside appropriate provisions. Second, the method used by regulators to set aside provisions is based on an “expected loss model”, while the accounting standards require provisions based on an “incurred loss model”. These conceptual differences can lead to different outcomes on such critical issues as the volume of classified asset, the adequacy of provisions, and therefore, capital adequacy. It’s useful to be mindful of these differences and understand the context that leads to the need to maintain these differences.