finance. in fact, if anything, a high pace of credit growth may have raised risks of overheating in some sectors, with potential implications for financial stability. the monetary policy committee ( mpc ) has flagged this risk several times since last year, and will continue to monitor the situation closely. on the other hand, there remains an important drag to growth, largely stemming from a protracted global recovery. in some parts of asia, the first quarter growth has turned out to be lower than expected, as a result of slowing global trade. in thailand, q1 growth has similarly been subdued, expanding 5. 3 percent as both private consumption and investment moderated. part of this pullback may have been a natural reversion to a lower pace of growth after an unusually strong expansion last year. lingering uncertainty about global demand bis central bankers ’ speeches may have also caused some export firms to delay planned investment. consumption may have been held back by farm income in the midst of low global commodity prices, and an accumulation of household debt, which is now at 78 percent of gdp. set against this weaker - than - expected domestic demand, is relatively resilient exports which expanded more than 8 percent. given the still weak global demand on the one hand, and already easy financial conditions on the other, monetary policy must carefully weigh the merits of providing growth support against financial stability concerns. policy interest rate is not the only available tool to address these multiple objectives. macroprudential measures, in particular, are also part of the policy tool kit. the mpc will continue to exercise its best collective judgement as to what course of action and policy mix are deemed most appropriate to ensure maximum sustainable growth for the thai economy. challenges from capital flows and exchange rate volatility let me now turn my discussion to a topic that has attracted a lot of attention recently, namely the issue of capital flows and exchange rate. the appreciation of the thai baht this year up to late april has raised some concerns. during this period, the baht strengthened nearly 7 percent against the us dollar, and 10 percent against our trading partners ’ currencies. what has caused such movement in thai baht? there is little disagreement that, over a long period of time, exchange rates tend to appreciate in economies with better growth prospects, strong external balances and overall sound fundamentals. over the past decade, currencies in thailand and other parts of asia have followed gradual appreciation trends, broadly consistent with their respective

supervision of banks and groups with significant crossborder activities would facilitate a more efficient management and resolution of cross - border crises. it would be easier to reach a common assessment of the systemic importance as well as the solvency of the bank or group in question. what i, in content, am proposing is that the eofs in its embryonic stage would function more like a non - regulatory central bank than a traditional supervisor. the eofs would conduct macro - prudential oversight and act as an enlightened speaking partner to the supervisory authorities. in my view, it is important that the eofs is a separate agency with an independent status. the reason is that in order to be successful the eofs would need a high level of operational independency and integrity. it is also important to achieve a necessary division of power. the eofs should cooperate closely with other organisations but should still be free from direct guidance and involvement from national authorities as well as from the european commission and the ecb. in my opinion, it should be given the same independent status as the ecb has today. with many other pan - european regulatory bodies already in existence, it should not be too hard to come up with suggested proper financing arrangements. if successful in its initial role, the tasks of the eofs can gradually be extended by assuming additional supervisory powers for the truly cross - border banks. it would however first have to prove its merits. as long as the eofs operates in addition to the national authorities another layer of supervision is added to the present structure. from an industry perspective this would imply a greater regulatory burden. however, i believe – and hope – that it is something that authorities and banks can live with if the supervision as such improves and if the proposal increases the chances of a substantially lower regulatory burden in the future. people acquainted with the present regulatory and institutional set - up within the eu may ask if what i am proposing is not already in place, considering the existing consolidated supervisory model and the role of the committee of european banking supervisors ( cebs ). however, even if both of these functions have their obvious merits they do not quite satisfy the needs. the cebs mandate is to promote harmonisation of regulatory frameworks and not to conduct ordinary supervisory work. and even if the consolidated supervisor has group responsibility it is an undeniable fact that the authority answers to the home - land constituents. thus, the eofs would contribute important functions in