. but the principle slowly began to be established that regulations that are inconsistent with market realities cannot be sustained indefinitely, although vestiges may remain long beyond the regulations ’ perceived usefulness. the pricing of liabilities was not the only response of banks to the new competition. another was the securitization of consumer and residential mortgage loans - the conversion of a pool of credits into a security - that others not necessarily other banks, could hold. securitization also allowed the creating bank to remove the underlying loans from its books. the bank, or an affiliate, might provide limited recourse or take an equity position in the pool to provide a credit enhancement, but the concept was clearly to eliminate the need for funding while profiting from fees or rate spread. the syndicated commercial loan soon followed the initial securitizations, with the managing bank acting more like the lead underwriter on behalf of a syndicate, a syndicate that, i might add, increasingly is composed of nonbank financial institutions. some observers at the time, projecting these developments, concluded that the bank of the future would hold virtually no assets, would require virtually no funding, and would have no branches. the vision that the bank of the future would be essentially an underwriter of diverse credits has not come to pass, despite the continued growth of securitization and syndication, because taking credit risk, the historic core of banking, remains profitable for those that know how to manage it effectively. in addition, with better pricing, deposits have been restored as a more - resilient funding source. moreover, the market test has clearly underlined the customer desire for branches at most types of banking organizations. pricing and managing risk one of the more painful lessons learned in the 1970s and 1980s is that accepting narrow or nonexistent spreads in order to retain market share is a losing strategy. this lesson seems clear enough, but many banks were nevertheless reluctant to see traditional customers shift to other markets, let alone other banks, and matched loan rates despite the resultant lackluster returns on equity. competition in the loan market can still be intense, as it is today. nonetheless, even with narrowing margins most recently, loan pricing is now generally linked to careful assessment of economic returns that often includes an assessment of the profitability of the credit and the overall relationship. loan officers, if left to their own devices, might be more interested in booking loans than in evaluating risk and pricing loans commensurately. but, pricing,

government stimulus measures. overall economic activities consequently improved, and i would like to thank all parties for their collective efforts. on the monetary policy front last year, a greater emphasis was placed on risks to growth, which justified the accommodative monetary policy stance throughout 2012. the monetary policy committee ( mpc ) lowered the policy interest rate twice by a total of 0. 50 percentage points. the first cut took place earlier in the year, and was designed to help speed up economic recovery after the severe flood. the last easing in the latter part of 2012 was intended to provide an additional cushion against the impact of global economic slowdown and to further bolster domestic demand to sustain growth momentum. these policy decisions were deemed consistent with keeping inflation within the target range, as well as maintaining the overall financial stability. in fact, the first joint meeting between the mpc and the financial institutions policy committee ( fipc ) took place last year, where the two committees shared their perspectives and information, as well as discussed in depth potential sources of systemic risk that could arise from economic and bis central bankers ’ speeches financial linkages. regarding capital flow policy and in collaboration with the ministry of finance, the bot continued to relax regulations to promote outward investment and foster more balanced capital movements. a clear lesson from the recent global financial crisis is that a good conduct of monetary policy alone does not necessarily guarantee a sound and stable financial system. as a result, central banks around the world have stepped up efforts to strengthen the supervision of financial institutions, improve risk management, and place a greater emphasis on monitoring systemic risks. last year, the bot introduced the basel iii capital regulatory framework with focus on improving capital quality, increasing capital base to provide cushion in the event of a crisis, and strengthening risk management procedures, especially in the realm of credit risks. these initiatives would further strengthen the stability of financial institutions, laying the foundation for stronger financial system and economy in the longer term. to increase the efficiency of the payment system, the bot has launched the imaged cheque clearing and archive system ( icas ), for bangkok and its vicinity since february 2012. in addition, the financial consumer protection center ( fcpc ) was set up to provide information about the bot, to receive consumers ’ complaints regarding financial services, and to offer financial education to the public, all of which have been well received. economic outlook in 2013 looking ahead, risks to growth have declined on the back of firmer, if moderate, global recovery, and robust