bandid nijathaworn : rethinking the role of financial soundness – financial infrastructure and long - term sustainable growth remarks by mr bandid nijathaworn, deputy governor of the bank of thailand, at the 8th bank indonesia annual international seminar 2010 on “ rethinking macroeconomic and financial policies ”, jakarta, 22 october 2010. * * * thank you chair, let me begin by thanking bank indonesia for the invitation. it is a pleasure to be here. on the issue of financial soundness, it is certainly hard to overstate the importance of a sound financial infrastructure. in normal times, the financial sector plays a critical role in driving the real economy. but during times of stress, having a sound financial infrastructure is all the more important, because it is the viability of financial institutions that typically draws the line between a mild economic setback versus a full - blown crisis. but what are the essential features of a sound financial infrastructure? let me highlight three key elements that i believe constitute financial system soundness. first is the efficiency aspect. the financial sector must perform its core functions efficiently. to this end, substantial progress has been made in asian emerging markets, partly by default as globalization and the rapidly growing economies in asia have raised competition among financial institutions, and also by design given the continuing efforts by the authorities to deregulate and develop the financial sector. making further headway on these fronts, therefore, should be a continuing process. and i think this is what bank indonesia is doing. similarly, in our case, the bank of thailand recently launched the financial sector master plan 2, in which we outline the key principles and guidelines for further strengthening of the financial sector over the next five years. chief among the agenda are our commitments to bring down financial transaction costs through further deregulation and promotion of more competition in the banking industry. the second element of financial soundness is the integrity aspect. that is, financial institutions must be sufficiently immune to “ runs ”, which i define loosely as correlated and large - scale withdrawals of deposits, triggered by sudden loss of confidence in the solvency of banks concerned. on this, a key lesson for emerging markets from the global financial crisis is that the push for financial market development must be accompanied by constant efforts to review and bolster as necessary the supervisory framework and standards, so that financial soundness can be ensured without compromising the financial system ’ s integrity. the third and last element of financial soundness

( b ) is committed to conducting its fx market activities in a manner that is consistent with the principles of the code ; and ( c ) considers that it has taken appropriate steps, based on the size and complexity of its activities, and the nature of its engagement in the fx market, to align its activities with the principles of the code. 3 the assessment would take into account issues such as the breadth of adoption of the code, the effectiveness of adherence mechanisms, the extent to which behaviour in the market has changed and the effect of the code on market functioning. 4 bis press release, 25 may 2017, “ central bank governors welcome global code of conduct for currency markets ” 5 source : 2016 bis triennial fx survey. 6 / 6 bis central bankers'speeches