These issues include a regulatory framework that promotes financial sector development without compromising financial sector stability, the optimal adoption of international standards for bank supervision, a level-playing field among different domestic financial players, and the competitiveness of the Thai financial system in the ASEAN context of Qualified ASEAN banks, and so on. Ladies and Gentlemen, I believe that the efforts put forth by the BOT will fulfill the objective of enhancing competitiveness and ensuring long-term macroeconomic and financial stability. However, we cannot do this alone, especially in a world of global economic uncertainty, domestic challenges and diminishing fiscal room. A common vision among all stakeholders is necessary for policy coordination. The advanced economies that are now experiencing public debt crisis offer valuable lessons for emerging countries as well as Thailand where planned fiscal spending will add to fiscal debt. I believe that at this crucial juncture, many countries, Thailand included, still have time to manage possible future fiscal stresses. Austerity by means of cutting public spending is one conventional way to achieve fiscal consolidation. However, most emerging and developing countries still require essential infrastructure investment to unleash their own growth potential. Austerity without growth would be futile. Therefore, what is needed is constructive fiscal consolidation rather than dogmatic austerity programs. Prudential cuts can be combined with infrastructure spending to raise competitiveness levels and ensure sustainable long-term growth. Rest assured that the BOT will do everything possible to create a stable long-term economic environment in which businesses can prosper. Thank you. BIS central bankers’ speeches  3

Overall, we salute the US firms and the US authorities for their actions, achieved at a time which for many involved was one of acute personal anxiety. There are a number of lessons for firms based in this country. All of those firms, including in particular those providing key infrastructural services, will want to review the robustness of their contingency and back-up plans. Risk modelling and regulatory capital That takes me to my second topic this evening. The damage to physical infrastructure in the US represents an extreme example of a particular type of risk - "operational risk" in the jargon of financial regulators. But the more general question of risk measurement and risk management has assumed a central position in both private and public sector efforts to reinforce the stability of the financial system. From the regulators' point of view, perhaps the first attempt to answer this question at a global level came with the 1988 Basel Accord, which required that all internationally active banks should - at a minimum - carry capital equivalent to 8% of risk weighted assets. The risk weights were very broad brush, and related only to credit risk. Set against the background of a concern about decline in the capital held by banks in the late 1980s, however, the Accord was a clear success. The average capital ratios of G10 banks rose substantially in the following ten years, and a more level playing field was established between banks based in different countries.