supervision authorities to identify and quantify risks of potential financial instability in advance. on this, we find stress testing to be a powerful tool to assess financial stability ex - ante. unfortunately, financial institutions and regulators in emerging markets have significantly lagged behind their counterparts in advanced economies, especially on credit and liquidity risk stress testing. therefore, regulators in emerging markets should move faster to increase the use of macro stress testing. they should also push financial institutions to invest in human resource and technology to conduct macro stress testing at least on an annual basis. and regulators and monetary policymakers must increase coordination in order to arrive at more relevant and convincing macro stress testing scenarios. the third challenge is the role of prudential measures. while it is unclear how effective domestic monetary policy can be in checking excessive asset price volatility, the threat of financial instability has given rise to a more prominent role for macro - prudential measures to reduce the procyclicality of the credit market. as we see it, the primary challenge in this respect is how best to move forward. combining the use of prudential measures with monetary policy is a useful policy option, but it is still an unsettling issue because of the concern for efficiency. in practice, discretionary prudential measures pose difficulty in the form of potential regulatory forbearance, market distortion, timing effectiveness, and the difficulty in modeling early warning system. rule - based prudential measures, on the other hand, pose difficulty in policy calibration. this is to say calibrating this type of policy tools has so far proven difficult for emerging market where data availability is limited and large structural breaks are usually present. turning to longer - term perspective, the attainment of monetary and financial stability is determined predominantly by embedded structural features of the economy. this points to the importance of pursuing long run structural reforms. on this issue, we discuss the role that financial sector development and policy institutions and framework can play in this respect. first, financial development the first point we make on financial development is the importance of a well - balanced financial structure. efficient and well balanced financial system will allow the system to better manage and absorb shocks as the market would be less prone to one - way market conditions and possesses greater liquidity. a well balanced financial structure contributes positively to information processing, price discovery, and risk management. the experience of the asian crisis, for example, points to the critical importance of the development of long - term local currency

to remain competitive, banks will have to adopt new financial technology fast enough while making sure that the organizational structure, corporate culture, and business models are agile and adaptive. more importantly, large non - bank fintech players are becoming significant players in our financial landscape. banks cannot afford to wait and see the landscape change before taking action. every day, new business models are being developed. technology adoption by banks is therefore unavoidable should they wish to stay ahead. as ravi menon, mas managing director, recently said at the singapore fintech festival, “ in an industry facing the headwinds of lower economic growth and heavier regulatory burdens, innovation must be the way to refresh and re - energise the business model. ” fortunately, financial technology is being adopted in many asean countries, notwithstanding their different stages of development. singapore is testing a blockchain - based system for interbank payment to simplify the payments process and reduce costs. in cambodia, wing money transfer and payment services are popular among local people. in thailand, the government and the bank of thailand, together with the banking industry, are committed to supporting the use of technology for greater efficiency and productivity in the financial sector and the economy as a whole. early next year, prompt pay or the fast p2p payment system will be implemented. prompt pay will be an impetus in changing consumers ’ behaviours to use electronic payment for everyday goods and services. transactional banking could be easily completed online or via mobile phone rather than going to bank branches. this move towards less reliance on cash will reduce the cost of cash handling thereby increasing efficiency of the banking industry and the thai economy as a whole. on the downside, technology comes with associated risks. in recent years, cyber threats have increased dramatically in frequency, sophistication and their widespread effects. this year, at least four financial institutions in bangladesh, vietnam, ecuador, and the philippines became victims of cyber heist involving the swift system while atms in japan, taiwan, thailand, and recently in many european countries have been hacked. it security and cyber security need to be addressed for secure transactions and to ensure trust among customers. the bank of thailand and the thai bankers association ( tba ) have collaborated to set up an information sharing group ( isg ) or financial - sector cert. the group enables comprehensive information sharing and connects to other involved parties such as cyber security specialists, vendors, and legal enforcement agencies, to develop defensive, preventive and