doing whatever they wish. this, of course, applies to many other things that we do not allow banks to do and the answer really is that we still wish to see “ banks doing other services ”, rather than “ other businesses also offering banking services ”. this is because banks are critical organs of an economy and they should be separately supervised and examined such that they are safer than other activities which might be allowed to fail more easily. virtual banking, defined as banking without counter services, is still not allowed. the only thing that we have decided in this new and expanding area of the economy is that if the e - commerce service takes deposits, a banking license must be sought before the services could be offered. but like many things in life, it is not where you are, but how fast you are going, how fast you are catching up that is more important, and in this respect we are working assiduously to formulate the new rules so that we can join the leaders in the change to the new economy - new rules with the reliability that is always so necessary in any kind of good banking. in summary on our financial institutions ’ developments, they are going ahead very fast and they will have good rules to perform to, but i must admit we are coming from way off, and have a long way to go before we are competitive in our own country let alone abroad. ladies and gentlemen, so far i have talked at some length about the macroeconomy, good governance and developments in our financial institutions. even if all the things i have outlined about thailand were to happen, many people think that the economy would still be prone to instability unless the central bank is also revitalized. i am inclined to agree with them. for some reasons not yet identifiable, and that worries me because a good change normally only can happen when the problems have been clearly identified. but in any case, there were signs that the bank of thailand somehow has been sidetracked into the crony capitalism of the rest of the economy, a development whose job it is of the central bank to try and prevent. it was obvious therefore that the bank of thailand had to be restructured into an organization that would be effective and neutral. extensive work was therefore done employing re - engineering concepts using consultants as necessary. the six management levels have now been reduced to two, with people of different capabilities at the second tier depending on the importance of their work. at the operating level, there are also only two levels

wide support to deal with procyclicality problems includes the followings. first, there is a proposal on the build - up of capital buffer in the good times to be run down in the bad times and to prevent excessive credit growth. second, as being discussed with accounting standard setters, provisioning should be linked with expected loss rather than incurred loss, which is the prevailing practice. finally, the primarily simple and transparent “ leverage ratio ” should be applied as a complement to risk - based capital requirement under basel ii. implementation of many such policies is still subjected to significant work on calibration as well as qualitative issues such as consistency with risk - sensitive capital framework, and international level - playing field. such problems magnify in the case of emerging markets, which face constraint on data and institutional capacity. moreover, much of the work done on calibration would tend to serve the need of irb rather than sa banks that are the core in emerging market. thus, the reform agenda will need to pay proper attention to capacity building of banks and regulators. nevertheless, there are warranted rationales for its use in financial stability tool kit in an appropriate manner, given national context. in terms of measures to address systemic risk, the proposed ideas include systemic capital charge, capital for otc derivatives, and cross - border bank resolution framework. again, the same emerging market issue and dimension should be properly recognized. turning to the key microprudential policy framework currently being discussed at the international forums to ensure individual financial institution ’ s stability, the bcbs has proposed a package to address previous shortcomings in risk - based supervision as follows. for pillar i, regulatory capital for securitisation exposure is enhanced. in addition, the quality and transparency of capital is strengthened especially tier i capital, which would consist mainly of common equity and retained earnings. for pillar ii, supplemental guidelines are issued by requiring banks to manage firm - wide, concentration and reputational risks more effectively. valuation and stress - testing practices are also improved. moreover, compensation and bonus scheme should be aligned with longterm risk taking behaviour and performance. turning to pillar iii, focus is given to disclosure requirements to reduce uncertainties associating with securitization exposures. additional requirements include, for example, sponsorship of off - balance sheet vehicles, and resecuritisation exposures. on top of these, a new regulation on liquidity risk management, namely the so - called liquid