products and for asset - backed commercial paper to european money markets, how did the ecb react? the liquidity squeeze in the interbank money markets that was observed in early august 2007 was triggered by the larger - than - expected funding liquidity needs, or perceived needs, of some banks, while at the same time those financial institutions that had liquidity balances tended to hoard them because of uncertainty about their future liquidity position and increased counterparty risk. in the face of these information asymmetries and heightened uncertainty, the normal functioning of the euro money market was severely impaired. the ecb therefore stepped in and addressed these tensions, initially by launching a series of overnight fine - tuning operations, and subsequently by taking four specific measures to ensure that very short term money market rates remained close to the ecb ’ s policy rate and to contain upward pressures in the longer - term money market. first, the ecb shifted the time pattern of liquidity provision through its main refinancing operations in the interbank money market by providing more liquidity at the beginning of the reserve maintenance period and less towards the end of the period. this “ frontloading ” led to more balanced liquidity conditions and helped to keep very short - term rates close to the key policy rate, without changing the overall amount of liquidity provided. second, responding to banks ’ greater preference for assuring the fulfilment of their liquidity needs on a longer - term basis, the ecb increased the share of refinancing provided via three - month longer - term refinancing operations and reduced the share provided via the one - week main refinancing operations. again, the total amount of outstanding refinancing remained unchanged ; however, the average maturity was extended. third, the ecb undertook a number of specific measures designed to address expected money market tensions around the year - end. and fourth, to ensure the availability of funding denominated in us dollars, the ecb joined a concerted action with other central banks, notably the federal reserve system in december 2007, the aim of which was to improve global funding conditions. it may be useful to clarify that the eurosystem requires adequate collateral from its counterparties for its credit operations. adequate collateral in this context has two dimensions : first, the eurosystem should be protected from incurring losses in its credit operations. second, sufficient collateral should be available to counterparties, so that the eurosystem

m r pridiyathorn devakula : risk management - challenge for the thai financial institutions and regulator opening remark by mr m r pridiyathorn devakula, governor of the bank of thailand, at the market risk management techniques for the bis capital regime seminar, held in bangkok, 12 october 2001. * * * distinguished guests, ladies and gentlemen, i would like to personally extend a warm welcome and to express our deep appreciation to all of our distinguished speakers and panelists who have agreed to come to bangkok at this difficult time. i would also like to thank our co - host, the world bank, in the efforts and interest which they have shown to make this important seminar possible. it is also important to convey my appreciation to the members of the financial industry for your interest and enthusiastic participation in this seminar. as we all know, the new accord proposal is scheduled to be finalized early next year, with its implementation scheduled for 2005. countries that have not yet implemented the consolidated supervision will have until 2008 to comply with the new accord. thailand is in this second category since we have yet to be empowered by law to carry out consolidated supervision. the new banking act with such a provision is expected to take effect next year. even with such a relatively long grace period toward compliance, thai financial institutions have already taken the first step of the journey toward that direction. we have recently conducted a survey of the financial institutions to check their readiness to conform to the credit risk guidelines under the new accord. i have been reported that many plan to be ready for the standardized approach, while others are working towards the irb approach, this is a welcome news. more importantly, financial institutions have all started the effort to strengthen risk management in their respective institutions with some notable progress so far, and we look forward to more progress to come. i would like to take this opportunity to commend all of you for such efforts. after all, the bis capital requirement only serves as a cushion of losses or failure of an institution whereas it is the risk management that reduces the chance of failure. the significant progress you have made in the area of risk management deserves our full support and commendation, particularly so as this is a very difficult time for the financial industries. ladies and gentlemen, coming back to the issue of preparation for the new accord, one can see that significant challenges remain ahead. i will now turn to these challenges. first, the technical and infrastructure aspects. it is important to build up a deep understanding of