Banks can reduce lending volumes. Banks can also change the composition of their lending portfolio by shifting into lower risk-weighted assets, by, for example, tightening lending to enterprises and increasing lending to households. Norwegian banks are well on the way to adjusting to new and higher capital requirements, including a countercyclical capital buffer. Developments in banks’ earnings indicate that banks can increase their CET1 ratios by around 1 percentage point a year without reducing lending growth. 5  3  Basel Committee on Banking Supervision, An assessment of the long-term economic impact of stronger capital and liquidity requirements, August 2010. For an updated collection of references to studies of the costs and benefits of macroprudential regulation, see Annex 1 in IMF Working Paper WP/13/167, by Arregui et al. “Evaluating the Net Benefits of Macroprudential Policy: A cookbook”, July 2013. 4  See Norges Bank Memo No. 1 2013 for further discussion and references. 5  In the calculation there is an assumption of an annual increase in banks’ risk-weighted assets of around 4%, earnings in line with 2012 and all profits are used to increase equity capital. It is also assumed that the transitional arrangement is retained and is binding. 4  BIS central bankers’ speeches  Capital requirements and monetary policy The countercyclical capital buffer and the key policy rate are two instruments serving different objectives. The objective of the countercyclical capital buffer is to increase banks’ resilience to losses in a downturn. The primary objective of monetary policy is low and stable inflation.

Recently, Thai universities have offered international courses, aiming to attract students from GMS countries, who express greater interest to study in Thailand. Health is another important dimension of people connectivity. An increasing number of citizens from the GMS have chosen to receive medical services from Thai hospitals. I am certain that this trend will continue to rise in the future. Ladies and gentlemen, Let me now turn to the fourth aspect of regional integration, financial connectivity, which is a principle area of policy that the Bank of Thailand, in collaboration with other agencies, will continue to drive going forward. Better connected financial systems support and underpin all other aspects of connectivity. Infrastructure development, trade and investment activities, and people mobility need wellfunctioned financial infrastructure and proper eco-system in order to thrive. In the past decade, financial regulators of GMS countries have made noticeable progress to promote financial connectivity. Examples include introducing a more accommodative regulatory regime to allow Lao entities to raise funds from the Thai capital market. As a result, since 2013, the Lao government and firms have issued baht-denominated bonds, worth 28 billion baht in total, to 2  BIS central bankers’ speeches  support infrastructure projects in Laos. For the banking sector, the Bank of Thailand has encouraged banks to expand their regional presence to support growing trade and investment. As of now, there are 30 branches and subsidiaries of Thai commercial banks, set up in GMS countries.