with various liquidity support in interbank markets globally. this potential trend, of course, would also depend on accounting standard and a regulation on fair valuations, which itself is still under much debate. thus, strengthening of risk management and supervision is important. indeed, the importance of this is highlighted by the rebound in many regional stock markets as well as upward pressure on the currencies. i have also observed from some reports that, within the many financial centres, the recent return generated by fx traders have been strong, while hedge funds, thought to have seen end of days, are starting to come back to life. we may be heading in for a sporadic period of increased risk - appetite. at the same time, many corporate borrowers, particularly the large conglomerates which used to fund from global market, may switch to domestic market, due to retrenchment of international debt market, as well as still heightened risk - aversion and retrenchment of global banks. this would be at the same time as increasing issuance of local sovereign debt to finance stimulus package. in the early stage of recovery, risk of crowing - out may not yet be high, but even at this stage, the investment portfolio of local financial firms may shift significantly, and may likely see increasing concentration risk due to increased exposure to major conglomerate which used to source overseas funds. but as momentum of recovery gathers pace, competition for funds and risk of crowding - out rises. therefore, even abstracting from challenges of reshaping regulatory framework, managing the risks from the current market environment is demanding. uncertainty and risk remains high, and i believe there are four key risk factors we need to focus on. first, sustainability of nascent “ green shoot ” global recovery remains a subject of financial market speculation, and will continue to drive trading position and volatility. the sign of recovery in global economy appears to be revealed as “ green shoots ” after a deep recession. this recovery is credited to a wide range of public intervention in major economies, which has boosted the subdued private demand as well as reduced uncertainty especially in the financial markets. however, the sustainability of the nascent recovery is yet to be confirmed, as the financial systems in major economies have not been fully repaired. secondly, the timing and speed of the unwinding process of public stimulus packages have yet to be settled, the so - called “ exit policy. ” thirdly, the difference in speed of recovery between major economies and emerging

prasarn trairatvorakul : journey towards a more competitive, inclusive, connected and sustainable thai banking system speech by dr prasarn trairatvorakul, governor of the bank of thailand, at the association of international banks ( aib ) dinner talk, bangkok, 21 may 2015. * * * ladies and gentlemen, it is a great pleasure for me to be here on this special occasion. the topics i addressed in previous occasions focused on economic situations and developments. so much has been said and discussed on those issues, so today i would like to talk about the future development of the banking system in thailand which is equally important. as many of you here are already aware, we are drafting the third financial sector master plan which will cover the next five years time span. the process is quite challenging because it involves many stakeholders, both in the public and private sectors, including foreign banks like yourselves. we thank you for your suggestions and feedback provided individually and also as a group through the aib. today i will share with you briefly the concept and aspiration behind the development plan for the banking system in thailand. thailand is currently at a crossroad in need of structural reforms to cross over the middle income trap. this requires commitment from all stakeholders. the public sector is already taking the lead on infrastructure development to promote urbanization and more equitable income distribution. for the private sector, they will need to make a transition toward production with innovation and higher value - added. realization of these commitments requires long - term funding at reasonable cost from the financial sector. therefore, the roles of the financial sector should be highlighted. the ambition can be likened to the destination of our journey. what is our destination? it is to have a banking system that is responsive to changes in the real economy and able to meet its ever - changing needs. with this destination in mind, milestones are set at different stages with signposts to prevent us from getting lost or sidetracked along the way. for the banking system, these milestones and signposts are laid out in the financial sector master plans. we have come a long way since the 1997 financial crisis and have put in place foundations which shaped the country ’ s core financial system. in our first milestone of structural improvements, the number of financial institutions was consolidated from above 100 to about 30 today. international standards and best practices on risk management were adopted, built upon necessary infrastructures including the core payment system, the deposit insurance