Such a system should offer a wide variety of financial services. Since providing the necessary financial functions is more important than the exact set-up of institutions, we should be flexible as to the means to achieve the desired services. In practice, most countries’ financial systems contain banks, other financial institutions, markets and exchanges, and payment and settlement systems. I will later elaborate on why the financial system must be well regulated and supervised, in accordance with modern and globally-acknowledged practices, for instance those formulated by the Basel Committee for Banking Supervision. Moreover, the development of a well-functioning financial system depends on a number of external factors, such as macroeconomic stability, an adequate legal and judicial structure, robust rules for accounting and auditing, and a financial safety net to deal with problems occurring in the financial institutions and markets. In my presentation today I will discuss all of these components and I will base it on my experiences of transforming the Swedish system from highly regulated and inefficient to a modern one that today competes successfully on the international scene. The Swedish experience might in some ways also be relevant for other countries, although one must always take into account the specific domestic circumstances. The basic conditions underlying a sound financial system are similar for all countries. I will first give an overview of the regulated system we used to have in Sweden and some of its objectives and consequences and I will then turn to deregulation and the challenges we faced.

This in turn enables banks to differentiate good debtors from more risky ones, and charge them commensurate to their risk profiles. In view of bank oversight, the Bank of Thailand has reoriented its focus on supervisory framework away from solo-basis transaction-testing analysis, towards risk-based supervision on consolidated basis. To fulfill this objective, we have already issued guidelines on all key risk categories and undertaken internal reform and capacity building to meet the challenge posed by comprehensive risk-based supervision. An example in this area is the development of examiners’ manuals that are regularly revised to ensure consistently high standards of supervision. 4. Going forward  Ladies and gentlemen, in the next few years, Thailand anticipates both opportunities and threats in the retail banking sector for existing banks in the light of the implementation of the Financial Sector Master Plan. As regards the focus of regulators, more attention will be given to watchful monitoring of the use of credit cards, monitoring of non-bank credit institutions, and observance of governance by market participants. The changing landscape of financial system to be brought about by the Financial Sector Master Plan will create opportunities for present market participants that have the courage to explore the niche and capability to satisfy the specialized needs of this group of customers. They come in the form of a new type of bank license - retail bank and other incentives. The tier1 capital requirement of 250 million baht for retail banks will be conducive to their specialized lending to retail customers.