glenn stevens : the role of finance shann memorial lecture by mr glenn stevens, governor of the reserve bank of australia, at the university of western australia, perth, 17 august 2010. * * * i would like to thank paul bloxham for his extensive research assistance in preparing this address. thank you for the invitation to deliver the 2010 shann lecture. it is an honour. people are shaped by formative events, and edward owen giblin shann was no exception. born in hobart in 1884, his family moved to melbourne a few years later. growing up in the depression of the 1890s – an episode that hit melbourne particularly hard – shann saw firsthand the effect that financial crises could have on peoples ’ lives. those memories stayed with him and motivated much of his career ’ s work. 1 in his early adult life shann exhibited some fabian tendencies – and a flirtation with the left would be a not uncommon response by a later generation of intellectuals as a result of the sense that capitalism had failed in the 1930s. but by the time he had become prominent as an economist, his views had shifted in a direction that we would probably today call libertarian. one of his most noted works was a short pamphlet, published in 1927, that described the lead - up to and crash of the early 1890s. it was prescient in drawing parallels with the financial developments in the 1920s that preceded the 1930s depression. 2 the 1880s were characterised by rapid population growth and increased urbanisation which fostered an investment boom dominated by construction. there was a spirit of optimism, which saw international capital flow in and asset prices – particularly land prices – increase. leverage rose and lending standards fell. as shann ’ s monograph noted, financial regulation at the time abetted the excesses, including an “ untimely amendment ” of the victorian banking act in 1888, which allowed borrowing against a wider range of collateral. in the 1920s, when shann was applying this experience to contemporary issues, the problem was not so much excessive private debt or poor regulation. 3 this time the problem shann saw was too much public borrowing. he viewed the extensive public works popular with state governments in the 1920s as not only increasing debt but also lowering productivity. so it would come as no surprise that, after australia ’ s terms of trade collapsed in the late 1920s and international capital markets made new borrowing much more difficult, shann was among the group that argued that the standard of living that could feasibly be

pursuit of the digital economy, the government aims to involve all stakeholders to transform thailand to a lesscash society under the national e - payment master plan. in conjunction with the ministry of finance and the thai bankers ’ association, we have recently launched the promptpay system, which is an electronic faster payment system. it helps facilitate payment transactions and save costs for businesses and consumers. this morning i also witnessed the signing of an agreement with two banks ; consortium to roll out edc machines to 560, 000 shops and government agencies all over the country to promote the use of debit cards on a nation - wide basis. the bank of thailand also aims to promote competition, innovation, and digital financial services among financial service providers ( including fintech ). this move will benefit financial institutions, businesses as well as thai citizens. in addition, we will encourage niche players to help narrow gaps in access to financial services. in this regard, we have recently announced the regulatory regime using a “ sandbox ” approach. the regulatory sandbox will allow fintech firms and financial institutions to test the viability of their products and services in a well - defined space and duration, without being fully subject to all regulatory requirements that are normally applicable. this approach helps us assess risks arising from the proposed products and services, and provide sufficient consumer protection. the bank of thailand also recognizes that regulatory reform is crucial for competitiveness of firms operating in thailand. to this end, we are in the process of streamlining regulations using the regulatory guillotine concept to review and simplify many sets of regulations, starting with those governing capital flows and foreign exchange transactions. this reform is currently in the process of public consultation. lastly, in addition to upgrading our physical, financial, and legal infrastructure through structural reforms, the ability to reach out to regional economies given thailand ’ s strategic position will be important. for our part, the bank of thailand promotes greater ‘ financial ’ connectivity, for example through promoting local currency usage in the region and regulatory harmonization, particularly with clmv, our neighboring countries with high growth potential. such initiatives will lower financial transaction costs, spur more trade and investment and deepen regional financial integration. ladies and gentlemen, i hope my talk tonight has provided you with an overview of where thailand is heading in both the near future and the longer term. in the world of volatility and uncertainty, you can be assured that the bank of thailand will do our best to minimize adverse impacts from unexpected shocks that may prevent