Its recovery or wind-down must not be allowed to jeopardise the stability of the economy as a whole. For this purpose, the regulations stipulate requirements for resolution planning. For example, by end-2019, systemically important banks in Switzerland have to prepare ‘emergency plans’ demonstrating that they will be able to continue their systemically important functions in Switzerland without interruption in the event of a crisis. The second pillar also specifies requirements for loss-absorbing capacity. Systemically important banks must hold sufficient financial resources to cover losses in a crisis or to finance the costs of a separation of systemically important functions. Banks can use so-called  Page 9/14  ‘bail-in’ instruments for this purpose. These are essentially debt securities which can be converted into equity or written down in the event of impending insolvency. 20 These measures are especially designed to counter the de facto obligation by the state to provide assistance in the event of a crisis. The organisational arrangements facilitate an orderly separation of the central functions within a reasonable timeframe. Furthermore, creditors are to participate directly in the default risk. The intention is to ensure a bail-in by creditors rather than a bail-out by the state in the event of a crisis by predefining the criteria for when debt securities are converted or written down. The Swiss regulatory approach is thus aimed at tackling the fundamental causes of ‘too big to fail’. This was also the conclusion reached by the Federal Council in its 2015 evaluation report.

Indeed, estimates from both the International Monetary Fund and various investment banks suggest that the current value of Thai baht is consistent with the underlying fundamentals. To promote a deeper foreign exchange market and foster more balanced capital flows, the Bank of Thailand also launched a Capital Account Liberalization Master Plan, which entailed liberalization of Thai investment abroad and a streamline of foreign exchange regulations. There are also continuing efforts to enhance the private sectors’ adaptability and foreign exchange risk management. These initiatives should provide an extra layer of cushion to shield businesses against short-term market volatility. They are not, however, a substitute for structural improvement in productivity, which in the long run holds the key to success for the export industry. Given that the global environment is still subject to uncertainty, capital flows may continue to be volatile, and risks to financial stability warrant close monitoring, it is more important than ever that monetary policy strikes the right balance between providing support to sustain growth momentum while ensuring long-term financial stability. In the judgment of MPC, the current stance of monetary policy remains accommodative, with the real policy rate still in negative territory. As the balance of risks shifts between the need to support growth and the duty to safeguard financial and price stability, monetary policy stance will have to be adjusted accordingly. The Bank of Thailand stands ready to employ the right mix of policy tools under its purview to attain these goals.