The forum provides the opportunities for policy dialogues, exchange of views and concerns, and information updates, among other things. This is the major operational arrangement that we have put in place to make the separate authorities model work for us. No doubt other operational arrangements can be put in place to make the integrated model work as well. Having said that, let me add another dimension to the issue of supervisory arrangement – one that is related to central bank’s other key function, namely, monetary policy. I believe that supervisory policy and monetary policy can be arranged in such a way that they are complementary and supportive to each other. I also believe that the often-cited conflicts of interest between the two roles, if performed by the same institution, may have been overstated somewhat. If there are policy conflicts, these conflicts will have to be resolved regardless of who is in charge of supervision. Then, would it not be more efficient if the conflicts could be internalized and resolved within an institution? In fact, many possible mechanisms exist to help ensure full accountability for each role, thereby minimizing potential conflicts while getting synergies from having the two roles under one roof. The arrangement we use In Thailand, as I alluded to earlier, is the establishment of two separate policy boards that include outside experts.
The linking pin is membership in both policy boards by central bank’s senior management, which makes it possible for information and knowledge in one area to be usefully employed in performing the other, without compromising the mandate of each policy board. For example, detailed supervisory information about banks’ changing risk appetite and exposure to different economic sectors and markets – as well as how these risks are being managed – can provide useful early warnings about the health of the economy and potential systemic problems down the road. This can be a very important input for monetary policy board. On the other hand, central bank’s oversight of monetary policy and economic stability can strengthen and provide context to its supervisory responsibilities, for example, in identifying potential macro factors that may affect the health of financial institutions. Decisions about the stance and timing of prudential and supervisory policies in general can  BIS Review 32/2009  1  also be more appropriately made with the full knowledge of macroeconomic conditions and monetary policy. As can be seen, the two policies are essential to each other and hence it is useful or even desirable, in my opinion, for central banks to supervise at least the core financial sector, whether under a separate or integrated supervision model. This is most evident in times of systemic crisis where central banks’ last-resort lending is likely to be called upon and prompt decision is vital.