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

bandid nijathaworn : financial globalization and emerging market economies speech by dr bandid nijathaworn, deputy governor of the bank of thailand, at the panel discussion, bank of thailand ’ s international symposium 2008, bangkok, 8 november 2008. * * * first, let me thank the organizer for inviting me to take part in this panel. a lot has been said in the last two days about financial globalization and emerging markets. we spoke about the challenge for monetary policy, the challenge for financial regulation, and the implications for capital flows management, and on this panel, we discuss the importance of having the right international financial architecture to respond to the global challenge. but more important at this time, i think the current global financial turmoil also offers a unique and important perspective for us to look closely at financial globalization, in terms of the inherent risk, the lessons that can be learned, and how emerging markets should go about managing the process of financial globalization. my remarks today will be on the practical challenge faced by emerging market economies like thailand in managing the process of financial globalization. on this, i will focus on the financial sector and the implications that financial globalization has for the financial sector in emerging markets. a good starting point to discuss the issue is to look first at the lessons that can be learned so far from the current turmoil. for all that can be said, the current turmoil is a powerful manifestation of the risk and the complexities that could come with financial globalization. for me, the turmoil points to three important observations. first and foremost, it shows that financial turmoil can happen in any market regardless of whether it is large or small, or whether it is emerging or developed. once the imbalance is allowed to occur, financial distress will likely happen and there is no exception to it. second, the turmoil highlights the central role that the financial sector plays in a boom - bust cycle. first is the role that it plays as a mechanism that can contribute to and trigger a crisis. this is because a bubble usually cannot happen without excessive credit growth. therefore, without proper regulation, a combination of strong capital inflows, easy credit, and the procyclicality of the financial system can set the stage for a build - up of serious economic and financial imbalances. the financial sector also plays an important second role in that its strength and resilience can significantly help cushion the real economy from the impact of external shock. the fact that a majority of emerging markets in