Moreover, we expect the financial sector advancement to also contribute to the overall economic and social development of the country. Thus, the plan will also aim to promote a more complete financial access, ensuring that all needed financial services are available at appropriate prices to bankable users in all market segments. I envisage that these objectives would be achieved through policy measures under three main pillars. The first pillar will aim to improve financial institutions’ operational efficiency by reducing unnecessary costs that stem from outdated or overly restrictive regulations and approval process. In this regard, private sector’s input will be a key ingredient in improving the regulatory environment to one that is more conducive to business efficiency and innovation, while ensuring that prudential considerations both at individual and systemic levels are not compromised. The second pillar will look at improving efficient intermediary functions of the financial sector by increasing the level of competition through further deregulation and liberalisation. Deregulation would involve expanding business scope and enhancing the role of existing players, including banks, non-banks and other niche banks. One of the deciding factors for the optimal number and type of new players would be the value added that these new institutions, be they universal banks or niche banks, could bring to the financial system, such as technical expertise and product innovations. Set against these benefits, however, are potential risks to financial stability stemming from disorderly competition and exits. Thus, liberalisation considerations will be grounded on a robust supervisory framework and be appropriately sequenced and phased.

So far, we have observed the cost-push pressure in the recent acceleration of domestic headline inflation, which rose from 2.3 percent at end-2007 to 5.3 percent at end-March, averaging 5.0 percent during the first quarter of this year. During this same period, core inflation averaged 1.5 percent. The central bank is keeping close monitoring of the inflation trend. The aim is to prevent higher inflation from dampening the anticipated recovery of consumption as purchasing power declines. And, rising costs would also reduce business profit margins and delay private investment. Nevertheless, though this downside risk is substantial, higher commodity prices will accelerate farm income, which tends to augment consumer purchasing power and income of agricultural exporters. As for the volatility emanating from international financial markets, my view is that the global financial environment may become more volatile for the rest of this year. However, now that the US dollar has lost sufficient ground, no one knows for sure which way a currency will move. But, with increasing likelihood, we should expect to see more 2-way movements in regional currencies. On the impact of the sub-prime woes on the Thai financial system stability, I can assure you that the direct impact of the sub-prime crisis on the Thai economy is minimal. As you may already know, only four Thai banks have CDO investment exposures, accounting for merely 0.3 percent of the banking system’s total assets. Of the four banks, the one that was more affected than the rest has already recapitalized.