Without wishing to anticipate this inquiry, let me just note that we should, as far as possible, manage problems before they arise. Finansinspektionen’s inquiry appears to be a step in this direction. The Baltic countries – more stable but still cause for concern One risk tied to the financial markets and which is particularly important to Sweden, is economic developments in the Baltic countries. Just a few weeks ago, we met here in the Riksdag Committee of Finance to discuss the Swedish banks’ commitments in Estonia, Latvia and Lithuania – what has happened in recent years, what we are expecting to see in the future and what we can learn from recent events. I do not intend to repeat what we talked about then, but can note that developments in the Baltic countries do appear somewhat brighter now than they did a while ago, but that the future is still very uncertain. One question that could affect the region as a whole is, for example, Estonia’s application to join the EMU. Loan losses in the Baltic countries are still increasing, which in turn has a negative effect on the Swedish banks’ profitability. We are counting on loan losses there peaking during 2010, but also on the Swedish banks being able to cope with the strains this will entail. An important element here is that the banks have increased their capital and thus their resilience to increased loan losses. The road ahead of us is not without problems.
The financial transactions are derived from real economic activities, and hence risks are understandable and manageable, with lending to domestic companies accounting for 70 percent of loan portfolio and the rest is mainly mortgage loan. The direct exposure of Thai banks to European countries is also very small. Investments and loans made by Thai banks to Europe are only 0.3 percent of total assets, while claims on Thai banks by European countries are even smaller at 0.03 percent of total liabilities. Nevertheless, we will be watchful of the second round impact of the EU crisis, particularly via impact on exports that could impact asset quality. Apart from the existing solid fundamentals outlined above, Thailand is currently striving to develop a more efficient financial system to anticipate increased regional integration. The key driver and rationale behind this momentum is clear. ASEAN economies aim to increase competitiveness from increased economy of scale and scope, and technology transfer, with link up of supply chain of ASEAN and ASEAN plus 3, in particular. This, in turn, will help strengthen our competitive position in the global market. Thus, the vision of financial sector is that it should seamlessly facilitate this process, whilst safeguarding financial stability. It should be emphasized that economic integration in ASEAN is not aimed to reach the same level of integration as EU, as the single currency and monetary union is not on the agenda.