This data constraint could also become an issue for some developed markets, given a structural break in data due to the financial crisis and market dislocation. On top of these, there is the issue of level playing-field, as the structure of bank asset and liability in emerging and developed countries may be significantly different. We have found several policies that may have impact on level playing-field, between countries and business models of banks. An example is the application of a simple leverage ratio, which does not take into account inherent risk, because this would tend to penalise banks in developing countries that generally hold less risky assets compared to developed countries. In addition, macro-prudential measures, such as leverage ratio, could likely have a macroeconomic impact, possibly similar to use of liquidity reserve requirement as per classic monetary policy tool, and thus coordination with macroeconomic policy is vital. For central banks with dual role, this is less of a challenge, but for separated regulators, the issue of organisation structure once again comes into play. Turning to the Bank of Thailand’s involvement on these regulatory debates through various international forums – such as the bi-monthly BIS Governor Meetings, the Standard Implementation Group of BCBS, of which we are a member – we have proposed that developing countries be invited to participate in the formulation of new standards right at the beginning, rather than to be included at the later stage of implementation.
This decision was taken on the grounds that the main elements which entered the determination of the reference value, namely the definition of price stability, the estimate of the trend growth of real GDP and the trend decline in the income velocity of M3, had basically remained unchanged. The Governing Council will continue to monitor monetary developments against the reference value on the basis of three-month moving averages of the annual growth rate of M3 as monthly developments might be too volatile. In addition, we also noted that the generous liquidity situation in 1999 will have to be kept in mind when assessing the information content of monetary developments in the future. Considering the second pillar of the monetary policy strategy, namely the broadly based assessment of other indicators containing information about the outlook for price stability, most indicators and forecasts have been pointing to increasing upward pressure on consumer price inflation over the medium term. The strong increase in oil prices in 1999 and early 2000 and the depreciation of the exchange rate of the euro in recent months have contributed to upward pressures on import and producer prices. In addition to the direct effects of these pressures on consumer price inflation, there is 1  BIS Review 25/2000  the risk in the context of the strong cyclical upswing that these developments could, via second-round effects, have lasting effects on consumer price inflation.