prasarn trairatvorakul : financial crises and the future of global and asian banking statement by dr prasarn trairatvorakul, governor of the bank of thailand, at the sasin bangkok forum 2012 plenary session “ financial crises and the future of global and asian banking ”, bangkok, 9 july 2012. * * * theme : “ strategy for known - unknown ”. the critical success factors are 3 cs : coordination of regulators, commitment forged by inclusiveness, and communal responsibility to restore market mechanism as a pillar of governance and financial discipline. good morning. it is an honor to join all of you today. i would like to thank sasin for organizing this forum and for inviting me. over the past three decades, sasin has played an important role in grooming business and policy leaders who have been instrumental in building thailand ’ s open and competitive economy. today, we are facing another critical juncture for thailand and the global economy. this forum has brought together the world ’ s leaders in public policy, businesses, as well as academia, and is therefore a rare opportunity for dialogue on our strategy going forward. ladies and gentlemen, this brings me to the topic of my remark today. the future of banking industry at the global level and in asia is being shaped by three major forces, namely, the fragile global economy, global financial regulatory reforms, and the rise of asia which faces its own developmental challenges. these forces are interrelated and complex, no one can claim to fully understand the final outcome. so is this the new paradigm of known - unknown? that is, we know what the major drivers of change are, but we cannot forecast outcome. so the key strategic challenge is how to deal with known - unknown. for the short - term, the key priority is dealing with the fragile and volatile global economy. stability is the priority for banks and regulators. the strategic policy question is how to get the right balance between risk and return, stability and growth. weaker banks will retrench, leaving rooms for the few stronger banks to take up market share. in asia, we have seen banks from the asia - pacific, notably japanese, chinese, and australian banks moved into market space where european and u. s. banks have retracted. asean banks are also shifting strategy to play a greater role to support their conglomerates in the regional expansion. if this regional banking trend continues, what are the implications for banks, regulators, and central banks? while

to rise to the challenge, and to act as check - and - balance on public policy. in closing, we are at an important turning point where we face paradigm shift. this is one of the realignment of relationship between the market, regulators, and society. in crisis countries, the balance of the relationship between the financial industry and the society shifts because the cost of financial crisis is born by the society. in emerging asia, public policy including financial regulation comes under pressure from social demand for financial access as well as consumer protection. these naturally accompany the take - off in growth as a result of economic and financial liberalization. both banks and regulators need a proactive strategy to deal with social and political environment that will shift banking environment and regulatory paradigm. thus, the strategy for banks going forward must also include proactive governance and accountability framework that seeks to restore trust in market mechanism, and improve the social and political environment in which they operate. failing to recognize the powerful social forces will result in less than optimal regulations. similarly, the strategy for successful global regulatory reform is to assure an inclusive process, to garner commitment and credibility for the reform. in concluding, the key strategy for dealing with this paradigm shift of known - unknown is based on 3 cs. coordination to deal with our interconnected financial stability. bis central bankers ’ speeches commitment forged by inclusive global reform process. and, communal responsibility, or governance, that can regain trust of society in market mechanism, so that we can rebuild market discipline as a key governance and pillar of the financial system. these are our best hope for striking the right balance between risk and return, growth and stability, and regulation and market discipline at a time of known - unknown. thank you for your attention. bis central bankers ’ speeches