But there are still issues and concerns about the real extent of changes in lending standards and the potential problems that rapid credit growth might pose if the global economy were to turn to a slower gear. Similarly, Asian banking systems remain relatively close to the participation of foreign banking, as compared to other emerging market regions, a development which may be foregoing important benefits in terms of modernization and competition. All in all, I would conclude that the financial sector in Asia is still lagging behind when compared to other very dynamic and exemplary sectors in the region, such as certain industries, education and technology. I believe that this imbalance may eventually become a drag for the consolidation of a sustained growth path. Therefore, the development of the financial system is of central importance for the long-term growth perspectives. Under these circumstances, banking reform and restructuring is an important challenge that many Asian economies are inclined to face. Let me tell you that in Spain we know well this challenge and its rewards. The highly successful performance of the Spanish economy over the past 20 years cannot be explained without taking into account the significant contribution by the financial sector and, in particular, by the banking system. In turn, the transformation – and improvement – of our banking system in this period has been outstanding. This is evidenced, for example, by its favourable performance in terms of profitability, efficiency and solvency, both on an absolute basis and in comparison with other countries.
2  BIS Review 94/2010  As for the banking system, we have built up sufficient bank capital, partly benefited from our prudent risk management. Our supervision developments have also come a long way. With intensive and continuous legal and regulatory reforms since the 1997 Asian crisis, our financial system is now resilient and in a good position to support growth. On this note, let me also say that the Bank of Thailand holds regular meetings with representatives from both Thai and Foreign Banks Associations, as well as meetings with their top management to discuss current issues and policy implications. This dialogue helps us to continuously strengthen risk management such that the financial system will remain in a strong position to serve the real economy efficiently. Third, thanks partly to export diversification over the years, Thai export is now recovering strongly despite a considerable shock to trades. A decade ago, Thailand relied mostly on G3 countries as our export market, but now, ASEAN market as well as BRIC (i.e., Brazil, Russia, India, and China) and other new destinations are emerging strongly and help diversify risk from the G3 countries. We also did not get much impact from the European debt crisis since our exports to PIIGS countries (i.e., Portugal, Ireland, Italy, Greece, and Spain) account for only 1.8 percent of total exports. Despite an impressive export growth now, Thailand needs to become more resilient against greater competition by an increasing number of emerging markets.