of this year, domestic demand slowed down markedly. at the same time, domestic credit growth was still quite high, stock prices continued to advance, and activity in the housing market remained brisk. moreover, portfolio capital inflows continued and the baht was appreciating. this presented a dilemma and was an example of the difficulties posed by policy spillovers. against the backdrop of weak global demand, we cut the policy interest rate. we contemplated the use of certain prudential measures, including those on capital flows, in order to complement domestic monetary policy as well as offset some of the impact of capital inflows on domestic financial conditions. but since the qe tapering talk began in earnest in may, the global financial environment changed dramatically, and with it the nature of the policy trade - offs. the communication by the federal reserve about possible tapering of its bond purchases was a key turning point for global financial markets. financial conditions suddenly tightened in response. long - term interest rates rose in the us and emerging market yields increased even more, reflecting a reversal in risk appetite. the prospect of fed tapering became a key consideration for monetary policy in emerging market countries. in most countries monetary policy remained tight in order to lean against excessive currency depreciation ; a few countries raised their policy rates in an attempt to stem capital outflows. for some countries, as economic activity softened and inflation fell, monetary policy may have ended up being tighter than intended as a result of tensions caused by policy spillovers. at this juncture, the key question is how to design or adjust policy frameworks to cope better with global interconnectedness while preserving monetary policy independence. i hope the conference will help shed further light on this. in doing so, we have to be mindful that global liquidity conditions will continue to largely depend on the macroeconomic conditions of the reserve - issuing countries. currently the us dollar dominates the international reserve system as a safe asset. the continuation of this role rests on some basic requirements. a reserve - issuing country has to illustrate a good track record of prudent macroeconomic policy. and as recent events have reminded us, there is a large fiscal element to this. one cannot separate the status of a reserve currency from the solvency of the sovereign. the use of the us dollar as an international store of value and medium of exchange very much depends on the continued credibility of the us treasury in honoring its debt obligations. in terms of monetary policy, it is understand

debt market, to increase the depth and the breadth of financial market. in relation to this, bis identified that the lack of diversified structure and market may lead to increased risk from concentration of credit and maturity risks in the banking system as lack of markets may lead to the mispricing of risk and excessive delay in correcting large exposures, as well as increased vulnerabilities from capital inflows. the second point we want to make is the importance of strong financial market infrastructure. one of the key issues for emerging markets is the structural weaknesses which can create disincentive and moral hazard. the presence of such distortions contribute to built - up of financial vulnerability, hinder growth of market solution for tackling risk, and complicate policy actions in events of crisis management. progress in correcting these weakness however may be slow. market - driven financial market developments need the support of critical infrastructure, namely : information that allows efficient decision making and pricing on various asset markets, financial as well as related market such as real estate market, which are still very lacking in many emerging markets, and may be an area of public support. legal reform to ensure enabling environment for innovation in products and business models of financial system. and human resource with proper competency in modern financial and risk management are scarce and is becoming a bottle neck for development. the authority may need to step in to facilitate training and accredition of professional standards, if it has external benefits. notwithstanding these challenges, notable progress has been made by emerging markets in the past decade, much of which catalysed by comprehensive economic reform in which market - oriented economic and financial liberalization been main features. for east asia, despite the progress made, significant gap still exists in diversification, efficiency and robustness when compared to the role played by financial markets in the developed economies. looking ahead, in addition to the pressure from globalization, the shift in demographic structure will also be an additional pressure. this is to say some smaller emerging markets will face aging population and increase demand of wealth management, while supply of local products are limited for diversification. this will pose challenges for inter - temporal allocation of resource and risk. thus, it is imperative that emerging market devise a proper strategy and process to expedite reforms and develop the financial system. the second long - term reform i want to bring up is on policy institution and framework. on this, two institutions are upmost important for attaining monetary and financial stability. the first is