Key in managing the risks is to identify the sources and assess the extent of its impact to the business. Recognising this importance, The Financial Action Task Force or better known as FATF, has provided a clear statement on this under the very first recommendation in its Revised International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation. Countries, financial institutions and designated non-financial businesses and professions are required to clearly identify, assess,  BIS central bankers’ speeches  1  and understand risks. Understanding of those risks will then set the context for taking actions and allow better allocation of resources to effectively manage and mitigate those risks. To respond to this development, Bank Negara Malaysia has issued revised policies on Anti Money Laundering and Counter Financing of Terrorism (AML/CFT) in September 2013. The integral component of the revised AML/CFT policies is the introduction of an obligation for reporting institutions to adopt a risk-based approach in identifying, assessing, and understanding the money laundering and terrorism financing risks of respective reporting institutions. The risk-based approach is an over-arching requirement that runs through all the other elements in the AML/CFT policies. Proper assessment and understanding of the risks will allow reporting institutions to tailor an appropriate risk controls and establish proper policies and procedures to mitigate the risks. The revised policies also focused on refining Customer Due Diligence (CDD) requirements to reflect the varied risk levels.
The current account surplus is expected to top 6 per cent of GDP this year, amounting to more than 26 billion USD. Public debt stays rather stable at around 43 per cent of GDP. Our international reserves stand at almost 3 times of short-term debt, among the highest in the region. The non-resident security holdings in our bond market is lower than 10 per cent, while those in the Stock Exchange of Thailand account for around 30 per cent of market capitalization. Such relatively low levels of non-resident participation, compared to our peers, suggest limited exposure to future capital flight. Corporate sector’s foreign debt also accounts for just 13 per cent of total corporate debt as of mid-2015. Moreover, most external debt is concentrated among large corporations. These large firms tend to manage their exchange rate exposure well, by utilizing financial hedging instruments. Careful risk management practice among Thai corporates and financial institutions has made them much more resilient to volatile movements of the exchange rate. The Thai banking system is also resilient, with a high level of capital buffer and stable loan growth, despite some deterioration in loan quality. Banks have closely monitored their customers, and have maintained a high level of loan loss provision as a buffer for bad loans. They are also well capitalized, with the capital adequacy ratio at 17.3 per cent and Tier1 ratio at 14.4 per cent, among the highest in Asia. This suggests that our banking system has sufficient capital to shoulder unexpected loss, and accommodate credit expansion.