22, No. 3, pp 265–290. Bank of England (2012), “Record of the interim Financial Policy Committee, 16 March 2012”, available at http://www.bankofengland.co.uk/publications/Documents/records/ fpc/pdf/2012/record1203.pdf. Bank of England (2011), “UK banks’ assets and the allocation of regulatory capital”, Financial Stability Report, December, pp 26–27, available at http://www.bankofengland.co.uk /publications/Documents/fsr/2011/fsrfull1112.pdf. Bank of England and Financial Services Authority (2011), “Our approach to banking supervision”, available at http://www.bankofengland.co.uk/publications/other/financialstability/ uk_reg_framework/pra_approach.pdf. Barclays Capital (2012), “Bye Bye Basel”, May. Basel Committee on Banking Supervision (2012), “Consultative document: Fundamental review of the trading book”, available at http://www.bis.org/publ/bcbs219.pdf. Basel Committee on Banking Supervision (2011), “Global systemically important banks: Assessment methodology and the additional loss absorbency requirement”, available at http://www.bis.org/publ/bcbs207.pdf. Basel Committee on Banking Supervision (2010), “Basel III: A global regulatory framework for more resilient banks and banking systems”, available at http://www.bis.org/publ/bcbs189_dec2010.htm. Basel Committee on Banking Supervision (2004), “International Convergence of Capital Measurement and Capital Standards: a Revised Framework”, available at http://www.bis.org/publ/bcbs107.pdf. Basel Committee on Banking Supervision (1996), “Overview of the amendment to the capital accord to incorporate market risks”, available at http://www.bis.org/publ/bcbs23.pdf. Basel Committee on Banking Supervision (1988), “International convergence of capital measurement and capital standards”, available at http://www.bis.org/publ/bcbs04a.pdf. Berlin, I (1953), “The Hedgehog and the Fox”, Simon and Schuster, New York. Bollerslev, T (1987), “A conditionally heteroscedastic time series model for speculative prices and rates of return”, The Review of Economics and Statistics, 69(3), pp 542–547. Calomiris, C W and Herring, R J (2011), “Why and How To Design a Contingent Convertible Debt Requirement”, Columbia Business School Working Paper, February.

As a result, funding costs for households and businesses in the major economies have risen as banks continue to tighten credit standards, which is not positive for growth. On account of this, global growth prospects seem to have further weakened, while the decline in oil price have helped ease concerns about global inflation. Future direction of the oil price, however, is still very much uncertain. The global economy and conditions in the global financial markets, therefore, have become more challenging, and they are likely to have important implications for emerging markets through the usual trade and financial channels. This is, therefore, an important area that we need to pay close attention to in the next few months. Under the current global setting, a decline in oil price will be positive for emerging markets like Thailand, and as a group, the growth prospect of emerging markets should remain satisfactory given their abilities to support domestic demand. But questions remain about individual economies on how resilient they would be in the face of such shocks, including the banking sector. In the Thai case, our assessment is that the Thai banking sector is strong enough to weather the current turmoil. This conclusion is supported by the following five important reasons. First and foremost is the low direct exposure that the Thai banking sector has to sub-prime credit and CDO. CDO exposure of Thai banks at the second quarter of last year was less than 0.3 percent of total asset.