prasarn trairatvorakul : navigating through volatility with long - term focus speech by dr prasarn trairatvorakul, governor of the bank of thailand, at the association of international banks ( aib ) dinner speaker series, bangkok, 29 july 2013. * * * excellencies, distinguished guests, ladies and gentlemen, i would like to thank the association of international banks for inviting me to give a talk this evening. it is my honor and pleasure to be here for the prominent institution that has its presence in thailand since 1996. the association ’ s work and efforts have contributed significantly towards the strength of the thai banking system as well as economic prosperity here in this country. for this special evening, i would like to share with you my views on the recent economic and financial challenges, as well as the bank of thailand ’ s role in safeguarding economic and financial stability. navigating through volatility over the past few years, we have gone through many economic surprises. last year alone the thai economy had to face several challenges, both inside and outside thailand – recovering from the devastating floods and coping with fragile global economy. and just a few months ago we only just started talking about a pick - up in global growth, driven mainly by robust demand in emerging markets. today, circumstances have changed, and we are facing with unexpected slowdown in emerging markets as well as the prospect of fed qe tapering. as far as global economic environment is concerned, i think we are going to see a lot more surprises. the world, in my view, is now obsessed with just a few things. i would like to highlight them in turn. first, the prospect of qe tapering is having wide implications for financial markets. we have already seen a sell - off of emerging market debts and equities, and a reversal of foreign capital flows that had rushed into the region earlier this year. with uncertainty in the amount of global liquidity provided by major central banks like the fed, we will likely see more volatile capital flows, exchange rate and commodity prices going forward. second, financial markets are watching closely abe ’ s plan to revive the japanese economy. its effectiveness, especially of its third - arrowed plan of structural reform, will be significant for global outlook and the degree of risk aversion in general. if the third arrow has failed before it even properly began, the economic momentum running by the previous arrows – monetary and fiscal

and catalyst for structural changes. despite more exchange rate volatility ahead, we could seize this opportunity to strengthen the fundamentals of the economy and reap long - term benefits that are likely to be greater than short - term costs of adjustment. for the banking sector, having a competitive and efficient banking sector is of extreme importance in the world where competition is borderless. for this, the bank of thailand is ready to provide an enabling environment for the thai financial sector. today, the bank of thailand has embarked on several important measures to enhance efficiency, strength and access of the thai banking system. new banking licenses were granted, including new subsidiary license for foreign commercial banks who want to operate their businesses in thailand. this should further increase competition, thereby raising the efficiency of the financial system. in addition, the bank of thailand has liberalized the opening of branches of thai banks to allow them more flexibility in managing branch network and reducing costs. further financial liberalization to facilitate regional integration is also considered. the asean central banks are negotiating the common standard of qualified asean banks ( qabs ). this will allow awarded banks to operate on a region - wide basis. and along with more liberalization, the bank of thailand has ensured that financial institutions are stable. so even though the thai banking sector is already well - equipped with capital and sound positioning, the bank of thailand has strengthened their capital bases earlier this year, following basel iii, and in line with international standard. as we already know, the payment and settlement systems are the backbone of the modern economy. in this regard, the bank of thailand has laid down financial market infrastructure to facilitate business operations. this year the imaged cheque clearing and archive system ( icas ) coverage will be expanded across the country to speed up the provincial cheque collection and clearing. this will help promote a more efficient payment system, enabling fast, safe, and secure financial transactions. the bank of thailand also encourages the use of electronic payment by coordinating with relevant parties to build infrastructure to facilitate this process. concluding remarks ladies and gentlemen, despite many roles that the bank of thailand plays in ensuring economic and financial stability, i would like to say that the bank of thailand ’ s policy alone cannot ensure sustainable economic growth. given thailand ’ s structural shortcomings, there is the need to improve thailand ’ s infrastructure and productivity, by improving technology and innovation. the well - being workforce and quality of education and training are also crucial to increasing competitiveness. for this, long