increasing contagious consequences in global economic and financial system. second is the institutional shift represented by an increasing role of non - banks and shadow banks, especially in some advanced economies. this has long been a trade - off for policymaking between economic and social considerations. on one hand, the shadow banking sectors undoubtedly provide financial opportunity to those with limited access. this institutional development also has encouraged higher competition in the financial system, leading to greater efficiency. on the other hand, this informal financial sector remains under - regulated and may incentivize risky activities, such as overleveraging, which could become systemic and prone to produce adverse outcomes to the system. bis central bankers ’ speeches the third development is what has taken the forefront role as an underlying driver of the recent crisis and policies that follow. it is the increasing interconnectedness amongst economies and financial markets. rapid integration of international trade and finance has led to promising economic prosperity. however, the increasing co - movements of business and credit cycles globally also played an important part in amplifying and spreading booms and busts cycles across the economies. this new financial environment has set stage for possible negative impacts both in terms of magnitude and depth on the real and financial sectors, especially those of the advanced economies. to that extent, we have witnessed, the deployment of unconventional sets of monetary policy instruments in order to shore up the economies and financial markets. part ii : responses to crisis and policy spillovers to emes : new trends of monetary policy ladies and gentlemen, the implementation of the extra - ordinary policies and financial reforms in advanced economies to tackle the crisis has generated momentous spillovers upon emerging market economies. these unintended effects are, mainly, ( 1 ) liquidity surge that drove up financial market volatility and created significant demand for safe assets, and ( 2 ) regulatory reforms in the financial system, mostly the banking sector, which raised the operating costs of financial institutions amidst heightened risks in the financial system. moreover, the situation had worsened as it added to the direct impact of weakened global demand. although the spillover impacts to individual economies have been uneven, monetary policy in most emerging markets have faced a tradeoff between achieving domestic objectives and managing external spillovers. the limited and, in many cases, stretched monetary policy tools have been designed to mitigate financial imbalance and vulnerability, and to restore economic growth and maintain targeted inflation. our experiences from various quantitative easing ( qe ) episodes remind us that the traditional monetary policy at

their status as a credible and efficient financial intermediary and able to meet private sector demands. these efforts included encouraging financial institutions to rationalize their transaction fees structure, introducing digital cheque - imaging system, and relaxing certain measures related to financial institutions to alleviate financial burdens of flood - affected victims. economic conditions and challenges for 2012 the path towards the future is not a smooth one. ongoing challenges from the past and new challenges will increase obstacles for the thai economy. domestic issues still remain an important hurdle while emerging external issues have created new challenges. these challenges are inherent parts of the mega trends, which include the crisis facing western economies and advancing regional economic integration. currently, thailand appears to be at a transitional gateway of these mega - trends, where the future looks blurry. the persistent economic slowdown plaguing the advanced economies of bis central bankers ’ speeches united states and europe leading up to sovereign debt crisis and continued financial system stresses do not yet have a clear resolution in place. many observers, however, view that after this transitional gateway, asia will be under the spotlight with china as the new leader, leading the economic expansion for other countries in the region. despite this optimism, countries in asia cannot afford to relax, sit back, and enjoy the ride, as economic volatility could arise intermittently via trade and financial channels from western economies. the degree of such impact depends on how well each economy is prepared for the potential disruption. another aspect of the transitional gateway is the asean economic community ( aec ) in 2015. this regional integration will bring not only changes in the regional investment and trade landscape, but also changes in people ’ s attitude as an asean citizen where travel and contact will become more frequent. nonetheless, we should not view aec as the final destination, but rather a stepping stone towards enhancing economic resiliency in the region by creating a single asean market and production base. this would help foster value - added characteristics of the thai economy and increase opportunities for our people, businesses, and everything else that will bring about a better standard of living for all. the two mega - trends i have outlined, when combined with the flood crisis at the end of last year, mean that thailand needs to quickly upgrade infrastructure to improve competitiveness. in particular, public investment in effective natural resources management system and improved governance of public administration will serve as an important driving force for sustainable economic growth. evolution of economic activities in line with the changing environment while the immediate obstacles may have changed, the