But perhaps more important from the point of view of the Bank of Thailand is that the current growth has been accompanied by a good degree of both internal and external stability. On internal stability, despite the recent surge in oil prices, inflation remains well in control. Core inflation, which is the Bank of Thailand’s policy target, is comfortably in the target range of 0-3.5%. And the unemployment rate, which shot up after 1997, has now returned to the level comparable to the pre-crisis period. 2  BIS Review 46/2007  On external stability, international reserve is now at a historic high of 67 billion USD and covers 3.4 times of short-term debt. In dollar terms, total external debt now stands roughly at half of its peak in 1997. Part of this rundown has been supported by the current account which has been in surplus in eight of the nine years after the crisis. It is worth noting however that external debt has picked up recently, and is being monitored closely. At the micro level, eight years after the crisis we see a strengthening in several aspects of corporate financial performance. Returns on assets of listed companies are now about twice its pre-crisis average while the average debt-to-equity ratio has fallen to about one-to-one. Higher returns and falling leverage have contributed to the interest coverage ratio of about 7 times.
The meeting of the Heads of State and Government of the euro area, held at the Elysée Palace on 12 October, with the participation of the President of the ECB, provides Europe with a structured and coherent framework: •  possibility of recapitalising banks;  •  guaranteeing new medium-term bank debt (1-5 years), via, in France, a EUR 320 billion funding vehicle;  •  revisiting the accounting rules, with the recent reforms of the IASB – international accounting standard-setters – and introducing greater flexibility in mark-to-market accounting rules, allowing assets for which there is no longer a market to be valued at amortised historical cost. Moreover, the European Investment Bank will be mobilised to support European SMEs. Lastly, long-term discussions will commence on the best way to regulate finance and how it may better serve economic development. 2  BIS Review 129/2008  3. The position of French banks and credit  Our banks are not immune to the crisis. They have direct exposures, in particular through US monoline insurers. They have had to make sometimes substantial write-downs. They are also impacted indirectly by the seizing up of certain markets and the rise in their refinancing costs. That said, our banks are sound and profitable. It is worth recalling four facts that, in the current period of turmoil, are often overlooked: •  The solvency ratios of French banks are high, and much higher than the minima imposed by the prudential regulation.