governor ’ s speech - the budapest eurasia forum 2022 “ challenges facing small, open economies in the changing global landscape ” dr. sethaput suthiwartnarueput, governor, bank of thailand magyar nemzeti bank, budapest, 19 september 2022 excellencies, distinguished participants, it is a great pleasure and privilege to be here at the budapest eurasia forum. while the global landscape is constantly changing, the speed and scale of the changes happening now are particularly large and rapid. many of these changes pose particular challenges for small, open economies. i would like therefore to focus my remarks on three key challenges facing small, open economies in this changing global landscape. part 1 : the first challenge is rapid and synchronized monetary policy tightening • we are going through one of the most rapid and concerted monetary policy tightening cycles in recent memory. about this time last year, the fed funds rate expected for the end of this year was under 0. 5 % ; markets now expect it to be around 4 %. almost all central banks have raised rates as part of what one might call the “ great policy normalization ”. this reflects the rapid return of inflation. two years ago, of the 60 countries tracked in the bis database, 42 had inflation below 2 %. today, that number is zero. • adding to the challenge, the prevailing initial conditions under which the major economies are embarking on this “ great policy normalization ” are far from ideal. the prolonged period of unusually low inflation during past decades allowed central banks to conduct extremely accommodative monetary policies for a very long time. this has contributed to a significant buildup of global financial vulnerabilities, including stretched valuations of risk assets, high house prices, and record high private and public debt. 1 • for small open economies, especially those from emerging markets, the challenge is to maintain stability in the face of more volatile capital flows, large swings in exchange rates, and tighter global financial conditions. the steep appreciation of the us dollar poses significant risks, particularly for those countries with high external vulnerability. many have had to follow the aggressive tightening of policy by the fed. • that said, the overall repercussions of advanced economy policy tightening on global financial markets have - - thus far - - been remarkably orderly. there have been no major dislocations in emerging market capital flows and there has been clear differentiation based on country - specific fundamentals. asian economies overall have exhibited resili

tarisa watanagase : risk - focused supervision and risk assessment opening address by dr tarisa watanagase, deputy governor of the bank of thailand, at the apec financial regulators training initiative regional seminar on risk - focused supervision and risk assessment, bangkok, 6 september 2004. * * * distinguished guests, ladies und gentlemen, lt is a pleasure for me to be here at the opening of the apec financial regulators training initiative on risk - focused supervision und risk assessment. in making this opening address, i would like to personally extend a warm welcome to all the participants and to express my appreciation to the federal reserve experts who have kindly agreed to share with us their knowledge und experience on risk - based supervision. this regional seminar is held at an opportune time, about two months after the basel committee on banking supervision released the basel ii capital framework. as you all are undoubtedly aware of, basel ii aims to strengthen financial stability by encouraging sound risk management practices at banking organizations. the tools uscd are a more risk - sensitive capital regime ( pillar 1 ) ; the application of risk - based supervision ( pillar 2 ) ; und improved public disclosures to enhance market discipline ( pillar 3 ). of the three pillars, one of the most formidable challenges for emerging market supervisors will be to properly implement the pillar ii risk - based supervisory framework. since risk - based supervision is the main topic of this seminar, it may be useful to provide a few thoughts on some of the broader regulatory und supervisory implications associated with implementing this framework. on the regulatory side, thc adoption of a risk - focused supervisory framework entails a shift away from a rigid, rules based approach to regulation and towards more “ incentive compatible ” prudential standards. by “ incentive compatible ”, i am referring to broad, principles based standards that encourage banks to develop and continuously update their internal risk management systems to ensure that it is commcnsurate with the scope and complexity of its operations. while the benefits are obvious, there are also some consequences for the supervisory side of our business that may not be readily transparent. first, an emphasis an broad prudential standards - while useful rot fostering sound risk management practices - will inevitably create significant challenges for front - line supervisors. this is because they will need to rely much more on sound professional judgment and critical analysis, and less on rules - based compliance criteria, in order to make proper risk assessments. this in turn, will require supervisory staff members to have a fundamental