Since the amount of required capital has a direct impact on business performance, it is therefore quite a challenge for supervisors to be requiring banks to hold different amounts of additional capital. For accounting standards, the most recent challenge is the accounting methods for sophisticated financial products, such as CDO and structured notes, in which differences in financial assets’ classifications can result in different financial impacts. For example, held-tomaturity classification conceals profit or loss until maturity, while trading classification charges profit or loss to financial statements in every accounting period. The interpretation for a suitable classification relies significantly on the intention of bank management as well as on the judgment of external auditors. The importance of this issue, as we know, has reemerged more demandingly following the sub-prime crisis in the US. Another practical challenge in implementing both standards is the use of complex financial models to measure risks in banks’ portfolio. In order to confidently use the models, there must be sufficient data, appropriate risk measurement techniques, and a rigorous validation process. At present, the most important concern is the lack of data. For example, for credit risk measurement, a certain amount of data on default is required. Such data typically are not readily available, and this is also the case here in Thailand. In addition to the lack of data, the IAS 39 also allows the use of fair value for all financial assets and liabilities, or the Fair Value Option.
In the fiscal area, our working assumption is that in 2019 the economy will receive a boost consistent with the approved Budget; from then onwards, the structural deficit will follow the path of gradual decrease defined by the authority (table 1). V.2. Inflation  In terms of inflation, given its lower level today and the estimate of somewhat larger capacity gaps, its convergence to 3% will take longer than we predicted last December. Thus, it is estimated that the CPI will end this year with an annual increase of 2.6% and return to 3% in the first half of next year. From then on, it will fluctuate in the vicinity until the end of the policy horizon, that is, the first quarter of 2021. The CPIEFE is projected to end 2019 at 2.4% and approach 3% in the second half of next year (figure 12). V.3. Monetary policy  As for monetary policy, the Board continues to believe that the evolution of macroeconomic conditions makes it necessary to reduce the monetary stimulus over the policy horizon. However, the change in the initial conditions of the baseline scenario caused by the lower inflation observed—in addition to other adjustments  6  mentioned above—implies that its convergence to the target requires the pace of MPR normalization to be slower than anticipated. in December. For short-term forecasting purposes, we use as a working assumption the MPR trajectory taken from our March Economic Expectations Survey, which foresees no changes in the MPR at least during the next two quarters.