in the u. s. one key purpose of macroprudential policy is to limit excessive exuberance that could come about during “ good times, ” for example, by requiring financial institutions to hold extra capital or by putting a cap on how much they can lend during an economic upswing. an implicit message behind this is that these policies will not only help strengthen the financial system ’ s resilience, but also moderate financial institutions ’ actions from being too optimistic during an economic upturn or too pessimistic during an economic downturn – the behavior known as “ procyclicality ” of the financial system that exacerbates the business cycle. all in all, it is envisioned that the combination of monetary policy and macroprudential policy will effectively safeguard financial stability and hence macro stability at large. on institutional arrangements, the global financial crisis clearly shows that the independent regulator model does not live up to its promise. some countries would have been better off in dealing with this crisis had the regulatory power remained with the central banks. the most notable example here is perhaps in the uk where the government will abolish the financial services authority ( fsa ) and transfer its regulatory responsibility back to the bank of england. while the uk may be an extreme case, a growing consensus has emerged that central banks should play a key role in preserving the overall stability and smooth functioning of the financial system. in this respect, having supervisory authority over systemically important financial institutions, such as commercial banks, would make the central bank ’ s job a little easier. clearly, having monetary policy, lender of last resort function, and macroprudential policy under the same roof allows for better policy coordination. ladies and gentlemen, against the backdrop of the changing policy philosophy in the global central banking community, let me now turn to the second part of my talk which is what the bank of thailand has been doing in the past few years with regard to the maintenance of financial stability. through the 1997 asian financial crisis, we learnt firsthand the importance of financial stability to the real economy as well as the need to preserve it. indeed, that the thai economy recovered rapidly from the global financial crisis this time can be attributed in part to policies that put a strong emphasis on the health of the financial system. in july 2004, upon an assessment that the booming economy may result in the buildup of certain financial imbalances, the monetary policy committee made the monitoring of “ factors contributing to financial imbalance

on thailand ’ s trade finance business. the challenge here is therefore to weigh carefully the benefits, the costs, the necessity, and the appropriate timing for the adoption of the new international standards so as to ensure that our financial system is not overburdened by unnecessary rules. again, this highlights the tradeoff between financial stability and financial efficiency ladies and gentlemen, in closing, let me reiterate that the bank of thailand gives great care to both price stability and financial stability. the policy responses undertaken by the bank over the past few years have helped preserve the thai financial system ’ s resiliency which in turn contributed to the economy ’ s turnaround. despite challenges in the period ahead, we will try our best to ensure that thailand ’ s economic and financial stability continues to remain intact so as to support the economy ’ s sustainable long - term growth. thank you very much for your attention.