We must create a banking community that does not tolerate imprudent business practices and lax systems and control. These are the sins of the past. Thailand, for instance, is carefully fostering a new business culture with the right values. On our part, the Bank of Thailand has since March 2002 announced guidelines supporting the practice of good corporate governance of banks' Board and management to ensure that they look after the interests of their stakeholders in an effective manner. These rules are not ground-breaking; they are just simple common sense. But we need to communicate clearly to the private sector what our expectations are and what the consequences are if the efforts fail. Ladies and Gentlemen, The cost of financial restructuring in Thailand was, after all, too enormous in figures and too painful in real terms to allow us to continue with our old way. In addition to changing the corporate culture, we are also amending a few key laws to solidify the foundation of our financial infrastructure. The new Financial Institutions Businesses Act will empower banking authorities with the necessary power to supervise financial institutions on a consolidated basis and to take appropriate actions against weak banks, with the provisions of prompt corrective actions. The Deposit Insurance Act will support a deposit insurance system to limit the loss of public money and reduce the moral hazard inherent in the current guarantee system.
I hope that over the course of this two-and-a-half days' conference, the deliberations, emerging from the experts and audience on a wide array of supervision-related issues, will shed more light on how best to deal with weak banks and systemic crisis. All banking supervisors and central bankers seek the “Holy Grail” aspiration for a stable financial system which is resilient and capable of returning to a balance after a shock. To fulfill this common goal, let me repeat a golden principle of sound banking supervision - prevention is fundamental to avoiding a banking crisis. We all know that handling a crisis is always very difficult and painful; therefore, supervisors and bankers have a shared responsibility and accountability to prevent banking problems. Supervisors must create a sound framework, foster a robust and effective system, and establish clear procedures to identify and deal with weak banks. This means the supervisors must be equipped with the legal power to effectively carry out their duties and have the necessary tools, resources and capacity to solve the problems. These are the necessary infrastructure or building blocks of a sound and stable financial system. Equally important, the Board and management of individual banks must shoulder the responsibility of monitoring and addressing bank weaknesses. They cannot fail in their oversight and risk managerial duties, just as supervisors cannot fail in their on-site and off-site supervision. In this respect, I am a strong believer that good governance is the corner stone of a stable financial sector.