progress in tackling a number of important problems arising from the 1997 crisis, and some of these are bearing fruit. on financial institutions, overall financial position of the thai banking industry has improved markedly. a number of banks are now showing profits while interest spread has improved to 1. 57 by the third quarter. commercial bank external debt has also declined substantially. more than 78 % of bank ’ s existing foreign liabilities have been new borrowings incurred after july 1997. this shows that thai banks have no difficulties in raising funds abroad. all banks are expected to meet full 100 % loss provision requirement by end of the year as required by the bank of thailand. in the last three years some b890 billion has been raised as new bank capital, raising the bis capital - adequacy ratio to 11. 95 % for the industry. this is relatively high by the minimum standard, and will allow thai banks to meet any provision in the future, as well as supporting credit expansion. non - performing loans, which peaked at 47. 7 % of total credit, have now been reduced to 22. 5 % of total credit at end - october. a total of b1. 1 trillion of npl have been restructured, while a further b1 trillion of npl is either in, or is in the process of being submitted to court, with resolutions that need to be accelerated. the remaining portion, b600 billion, of un - restructured debt consists mainly of loans to small and medium enterprises ( smes ), as well as consumer and mortgage loans. to speed up the restructuring of the last portion, especially the smes, the bank of thailand has set up a scheme of debt restructuring and new lending for smes with npl problems but have viable business prospects. this scheme is made possible through a credit guarantee by the small industry credit insurance corp. when the scheme was first introduced, there were some minor problems relating to the requirement for additional personal guarantee. this issue has now been resolved. it is hoped that the scheme will help smes in returning to a state of normalcy. in addition, the bank of thailand has encouraged financial institutions to separate their non - performing assets either to be sold or transferred to asset management companies. in all, 14 asset management companies have been approved, and approximately b579 billion worth of assets have been transferred as of end - october. with all these measures in place, we expect further progress in the resolution of the npl problem next year. with

are critical to the stability of the financial system. in particular, we are taking a more “ macroprudential ” approach, one that goes beyond supervisors ’ traditional focus on the health of individual institutions and scrutinizes the interrelationships among firms and markets to better anticipate sources of financial contagion. to do that, we are expanding our use of the kind of simultaneous and comparative cross - firm examinations that we used to such good effect in the scap. the federal reserve ’ s ability to draw on a range of disciplines – using economists, market experts, accountants, and lawyers, in addition to bank examiners – was essential to the success of the scap, and a multidisciplinary approach will be a central feature of our supervision in the future. for example, we are complementing our traditional onsite examinations with enhanced off - site surveillance programs, under which multidisciplinary teams will combine supervisory information, firmspecific data analysis, and market - based indicators to identify problems that may affect one or more banking institutions. although regulators can do a great deal on their own to improve financial oversight, the congress also must act to fix gaps and weaknesses in the structure of the regulatory system and, in so doing, address the very serious problem posed by firms perceived as “ too big to fail ”. no firm, by virtue of its size and complexity, should be permitted to hold the financial system, the economy, or the american taxpayer hostage. to eliminate that possibility, a number of steps are required. first, all systemically important financial institutions, not only banks, should be subject to strong and comprehensive supervision on a consolidated, or firmwide, basis. such institutions should be subject to tougher capital, liquidity, and risk - management requirements than other firms – both to reduce their chance of failing and to remove their incentive to grow simply in order to be perceived as too big to fail. neither aig, an insurance company, nor bear stearns, an investment firm, was subject to strong consolidated supervision. the federal reserve, as the regulator of bank holding companies, already supervises many of the largest and most complex institutions in the world. that experience, together with our broad knowledge of the financial markets, makes us well suited to serve as the consolidated supervisor for systemically important nonbank institutions as well. in addition, our involvement in supervision is critical for ensuring that we have the necessary expertise, information, and authorities