favourable. i also expect investment to play a stronger role as growth driver, in line with the consumption recovery. this will be a welcomed development to promote a more balanced economy. the slower domestic demand has also been mirrored by moderate growth of private credits. nevertheless, the banking system is strong, with the bis ratio of 15 percent at end - july 2007, while net npl amounted to 4. 4 percent of total loans. the return on asset which stood at 1. 3 percent during the first quarter of 2007 fell to 0. 7 percent for the first half of the year, reflecting provision in accordance with ias39, the new accounting standards as you know, to strengthen the capital base. meanwhile, qualitative improvements have resulted from much tighter board of director oversight and accountability, as required by the bank of thailand. on the non - bank side, non - bank credit card companies have been competing more strongly for market shares. to prevent default risks and npl, and to safeguard against the overall financial stability, we have strengthened efforts to communicate to and raise awareness with the general public on this issue. regulatory measures were also put in place to ensure that consumers were protected and well - informed, including the prescription of rules, procedures, and conditions for credit card business, including interests and service fee charges as well as debt collection. turning to macroeconomic stability, latest data for august showed headline inflation at 1. 1 percent and core inflation at 0. 7 percent. on the exchange rate, while the baht movement has reflected largely external developments, there have also been internal drivers, which include large surplus in current and capital accounts. during the first 7 months of this year, the balance of payments recorded a surplus of 5. 9 billion us dollar in total. overall, international reserves rose to over 74 billion us dollar at end - august, close to 3. 6 times of short - term external debt. in the absence of pressure on internal and external stability, monetary policy has become more accommodative. the monetary policy committee cut its policy interest rate in total by 175 basis points since the beginning of this year. the aim is to stimulate domestic demand to offset moderating export growth in light of the slower us economy and baht appreciation. nevertheless, exports would still remain an important driver of growth for next year. and, the latest economic forecast projects the thai economic growth to lie between 4. 5 - 6. 0 per cent in 2008, while core inflation is expected to stay comfortably

wide support to deal with procyclicality problems includes the followings. first, there is a proposal on the build - up of capital buffer in the good times to be run down in the bad times and to prevent excessive credit growth. second, as being discussed with accounting standard setters, provisioning should be linked with expected loss rather than incurred loss, which is the prevailing practice. finally, the primarily simple and transparent “ leverage ratio ” should be applied as a complement to risk - based capital requirement under basel ii. implementation of many such policies is still subjected to significant work on calibration as well as qualitative issues such as consistency with risk - sensitive capital framework, and international level - playing field. such problems magnify in the case of emerging markets, which face constraint on data and institutional capacity. moreover, much of the work done on calibration would tend to serve the need of irb rather than sa banks that are the core in emerging market. thus, the reform agenda will need to pay proper attention to capacity building of banks and regulators. nevertheless, there are warranted rationales for its use in financial stability tool kit in an appropriate manner, given national context. in terms of measures to address systemic risk, the proposed ideas include systemic capital charge, capital for otc derivatives, and cross - border bank resolution framework. again, the same emerging market issue and dimension should be properly recognized. turning to the key microprudential policy framework currently being discussed at the international forums to ensure individual financial institution ’ s stability, the bcbs has proposed a package to address previous shortcomings in risk - based supervision as follows. for pillar i, regulatory capital for securitisation exposure is enhanced. in addition, the quality and transparency of capital is strengthened especially tier i capital, which would consist mainly of common equity and retained earnings. for pillar ii, supplemental guidelines are issued by requiring banks to manage firm - wide, concentration and reputational risks more effectively. valuation and stress - testing practices are also improved. moreover, compensation and bonus scheme should be aligned with longterm risk taking behaviour and performance. turning to pillar iii, focus is given to disclosure requirements to reduce uncertainties associating with securitization exposures. additional requirements include, for example, sponsorship of off - balance sheet vehicles, and resecuritisation exposures. on top of these, a new regulation on liquidity risk management, namely the so - called liquid