In the past, in carrying out its oversight role, the Board had tended to rely mainly on examination report of the Bank of Thailand and that of the bank’s internal auditors to identify problems created by managements and to follow up on their resolution. However, with increasingly rapid and complex business developments, this process needs to become more forward-looking, so that preventive measures or prompt corrective action can be taken to cap any problems before it can affect the bank’s soundness. Supervisory agents cannot do this job alone. The oversight of Board of Directors is needed as they are much closer to the institution and its on-going developments. For this reasons, regulators worldwide have shifted their supervisory framework to mandating that the Board of Directors take lead responsibility for overseeing the process of risk management which ensures that the banks have internal prompt preventive and corrective procedures. Supervisors or regulators role would be confined to setting the broad framework, to be supplemented with area-specific examination to help provide additional independent crosscheck. For this reason, the Bank of Thailand has called on bank directors to take on an even greater responsibility. And some of you may well be contemplating what you must do in order to discharge this broader responsibility. Today presents a good opportunity for me to discuss with you the important principles underlying governance and responsibility of bank directorship. The Bank of Thailand has drawn out 10 key principles as follows.
It is important to note, however, that the main focus of an investment policy evaluation rests in the model of the Central Bank's actions. Having been responsible for the areas of Capital Markets, Currency, Operations Desks, and Corporate and Sovereign Credits, I am confident in concluding that there is a consensus in the world today that the Central Banks that have been assigned a multiplicity of functions and targets are doomed to fail. Successful Central Banks are those that have price stability as their only mandate. In this regard, I would like to emphasize that competence, seriousness and patriotism are a legacy of Arminio Fraga's administration at the Central Bank. There is no doubt that the implementation of a floating exchange rate regime and of the inflation targeting regime in Brazil at a critical moment for the Brazilian economy in 1999 are a hallmark in the history of Central Banks in emerging economies. The substantial improvement in transparency and credibility that has taken place over the past three years has been incorporated into the working structure of the Brazilian Central Bank. Arminio, thank you for the loyalty and professionalism you showed in the transition process. Although there are many instruments a government can use to implement its economic policy, the task assigned to the Central Bank is to keep the rate of inflation at a low level, mostly because the Central Bank has only one instrument, which is monetary policy.