The increasing blurring of boundaries between different financial activities and the building up of large financial conglomerates make consolidated supervision crucial. Consolidation includes financial as well as non-financial entities within a country, but also world-wide. The cooperation and exchange of information between supervisors for different financial activities (banking, securities trading and insurance) is important, domestically as well as globally. Informal or formal agreements must be concluded to facilitate such cooperation. Supervisors should not license banks, or their affiliates, if their organisational structures prevent effective supervision. In the same vein, home supervisors should not allow their banks to establish affiliates abroad, if the host authorities are not willing to exchange important information regarding developments affecting this affiliate. Transparency is key. Banks should be induced, by force and voluntarily, to properly disclose information of their activities to the general public. Information must also be timely, relevant and accurate. In this way, there is daily “supervision” of the bank by market analysts, depositors and others. It is understood that some bank activities are to be considered as strategic secrets which cannot be divulged, but in my view these are fewer than we tend to think. Hence, a related subject of great importance is the issue of accounting. To create transparency, accounting rules, including valuation rules, must provide a clear picture and reflect the true situation of a bank. Let me give you an example. A lingering problem in many countries is that banks hold large amounts of non-performing loans to companies, even those that are state-owned or formerly state-owned.

Indeed, the return to net inflow of foreign investment since the beginning of April, indicates the return of foreign interest in Thailand. However Thailand’s structural improvement needs a long way to go. Furthermore, economic fundamentals can be eroded if political uncertainty and global risks intensify. The prolonged political impasse will further reduce confidence, financial positions, and government spending. The labor force is already beginning to feel the stress, as recent surveys show the number of overtime hours worked has begun to shrink. Now I have presented to you the future conditions, from sound fundamentals to possible risks. With these conditions in mind, I believe that maintaining status quo while waiting for the political situation to resolve is not the appropriate way out because sound fundamentals alone cannot lead to growth. Thailand should use the current lull in activity as an opportunity to reposition for future growth. Indeed the private sector is already in transition, but still has a way to go. Further investment will both jolt some energy back into the economy and build an even stronger foundation for long term growth. 2  BIS central bankers’ speeches  Supportive roles of the Bank of Thailand and financial institutions An economy in transition needs support from all sectors of the economy. The real sector, financial institutions, and the Bank of Thailand have their own important roles which I would like to elaborate. Thailand’s economy should transition from efficiency to innovation to build competitive advantages. Up to now, we have increased productivity by reallocating labor and capital.