which focuses on the safety and soundness of individual financial institutions fell short of crisis prevention. while financial institutions may be individually safe, collectively they may be at risk due to herd behaviors and their interconnections. there is thus the need to look after the safety and soundness of the financial system in the aggregate, which is why the word “ macro ” in macroprudential. in essence, macroprudential regulation reduces systemic risks by building up resilience of the financial system during periods of credit boom and rising leverage as well as limiting spillovers from interconnections of financial institutions. it is indeed easy to see that several aspects of basel iii are macroprudential in spirit such as the countercyclical capital buffer and the requirement of large global banks to hold more capital. it is noteworthy that even before the global financial crisis, central banks in the asia pacific have routinely used macroprudential tools such as the loan - to - value or ltv ratio and minimum income requirement for credit card borrowers. we just did not call them macroprudential. in some way, it took the west their own crisis to realize the importance of restraining the buildup of systemic risks early on. ladies and gentlemen, the final part of my talk concerns the developmental role of central banks. when it comes to financial stability, this is an often overlooked and underappreciated role. looking back at history however, one finds a number of financial crises were associated with flawed or ill - timed financial liberalization. thus the path set forward for the financial sector by central banks may lead to destruction as well as prosperity. the thai financial crisis in 1997 was a case in point. although it was an inconsistent macroeconomic policy mix that precipitated the crisis, it was the decision back in the 1970s to allow structurally risky finance companies to operate alongside with commercial banks and the creation of the bangkok international banking facilities in the hope to transform bangkok into asia fourth financial center after tokyo, hong kong and singapore that made the financial sector vulnerable with overloaded risks. thus, when we started anew with our financial sector master plan to guide future developments of the thai financial sector in 2004, the two structural weaknesses were the first two to be eliminated. fast forward to today, all eyes are now on asean financial integration under the aec blueprint to create a semi - integrated financial market by 2020. the asean financial integration framework comprises four areas, namely financial services, payments and settlements

prasarn trairatvorakul : global challenges, global solutions – imfc issues statement by dr prasarn trairatvorakul, governor of the bank of thailand, at the international monetary and financial committee ( imfc ) twenty - third meeting, international monetary fund, washington dc, 16 april 2011. * * * on behalf of brunei darussalam, cambodia, fiji, indonesia, lao p. d. r., malaysia, myanmar, nepal, philippines, singapore, thailand, tonga and vietnam. introduction 1. we thank mr. youssef boutros - ghali for his contributions to the imfc, especially his leadership in completing the 2010 quota and governance reform. we congratulate minister tharman shanmugaratnam on his appointment as the new chairman. with his rich experience in understanding the interests of advanced and emerging market countries, we have full confidence that minister tharman will be able to make significant progress in fostering a global consensus on many challenging policy issues. 2. although the global recovery has gained strength since the last imfc meeting, its prospect remains fragile as several downside risks continue to prevail. having been successful in coordinating policies to contain the catastrophic damage from the global financial crisis, policymakers are now facing a more difficult task in forging a consensus on multilateral commitments for countries to take into account the impact of their policies on other members and the international monetary system ( ims ). such an agreement will not be easy to reach against the current backdrop of a multi - speed recovery and asymmetry in domestic policy requirements. nevertheless, it should be stressed that the need for such a consensus is as great as before, since the reliance on accommodative policies of advanced countries has reduced their urgency for structural reforms and complicated the conduct of policies in emerging market economies. if the current stalemate were allowed to continue, there is a risk that the global recovery would not be sustained and the functioning of the ims could become disorderly. in this context, the theme for this year ’ s imfc plenary, “ global challenges, global solutions ” holds special significance. fund surveillance 3. we look forward to the upcoming 2011 triennial surveillance review ( tsr ). to avoid duplication, an independent opinion of the gaps in the fund ’ s surveillance framework can already be found in the ieo report on the fund ’ s performance in the run - up to the crisis. the ieo