sharply. the banking sector, however, has been resilient given the low direct exposure to the toxic assets, the low reliance on global liquidity as a source of funding, and the strong capital base. the fact that the thai banking sector remains safe and sound is no accident. it is largely the result of continuing improvement in risk management capacity of the banking sector following the asian financial crisis, under a stronger regulatory framework and risk - based supervision. compared to some countries at this time, the banking sector in thailand is functioning normally, with the financial markets remaining relatively stable despite greater volatility and uncertainty in the global economy. at the bank of thailand, we are optimistic that policy efforts at the global level will be successful in stabilizing the financial markets and in providing a comprehensive solution to the current crisis. nevertheless, our view is that the adjustment that follows, and hence the process of global recovery, will probably take time. more importantly, in the thai context, given the global nature of the crisis, and the fact that our economy has been affected mainly through contagion, it will be difficult for an economy like thailand to achieve a sustained recovery on our own, if the global economy does not recover. therefore, in the context of policy, the focus of policy response in thailand should be on helping the economy and the private sector to adjust to the impact of the crisis, while ensuring that the key economic institutions and systems 6 most importantly the banking sector 6 continue to function normally, so that the economy will be in a position to move forward quickly once the crisis storm passes. it is in this context that the bank of thailand has been shaping our response to the current economic downturn. the response so far includes an aggressive easing of monetary policy, ensuring adequate liquidity to the financial markets and the banking sector, helping banks to better manage the increased risk in lending by introducing a government - sponsored credit guarantee scheme for smes, and encouraging banks to act early in assisting customers with debt rescheduling or debt restructuring so as to ward off the pressure on asset quality and on the non - performing loans. these are the direction and the measures we have taken in our response to the crisis, and more will be done if needed to ensure a smooth adjustment in the economy and the financial sector. judging from what we are seeing in terms of the recent broad global developments, i am confident that the combined effects of the fiscal stimulus by the government and the financial measures that the bank of thailand has

engaged in the review of such regulation and supervision. reflecting the globalization of finance, there is a growing tendency for the broad framework of financial regulation and supervision to be determined in international discussions. the bank, together with the financial services agency ( fsa ), has been taking part in discussions on financial regulatory and supervisory reform at various international forums such as the basel committee on banking supervision and the financial stability board, and i myself have been attending many of those forums. given that a robust global financial system is in the common interest of all countries, i believe it is critical for each country to contribute to the construction of internationally consistent rules and to establish a regulatory and supervisory framework that properly reflects differences between countries, such as in their financial structure. the bank will continue to make contributions in these areas. when comparing systems to ensure financial system stability immediately before the recent crisis from a central bank ’ s point of view, countries can be divided into two groups. in one, which includes the united states, italy, the netherlands, and many asian countries, regulation and supervision was carried out by the central bank, either alone or in cooperation with other authorities. in the other group, which includes the united kingdom and australia, the central bank was not involved in regulation and supervision. japan could be regarded as falling in between these two groups : the bank of japan does not have regulatory authority over financial institutions, but, as mentioned earlier, based on provisions in the bank of japan act, it conducts on - site examinations of financial institutions and provides various kinds of advice and guidance when the need arises. financial regulatory and supervisory systems around the world have been decided upon reflecting differences in countries ’ financial structure, stage of economic development, and historical background, and thus there is no uniform set - up that is correct for all countries. be that as it may, the recent crisis has shown clearly that it is indispensable for central banks to be involved in one form or another in ensuring the stability of the financial system and that central banks should play a significant role in the area of macroprudential supervision. here in japan, we have a system where the fsa, which is in charge of financial administration dealing with regulation and supervision, and the bank of japan, which is the central bank, cooperate with each other and each fulfills its respective functions to ensure the stability of the financial system. while it seems fair to say that japan ’ s financial system has remained relatively stable compared with those of the united states and europe