This is then followed by a discussion on the authorities’ major policies to further strengthen financial institutions’ positions in view of more intensified competition and changing financial environment, including the implications of these policies. Finally, I will conclude this morning’s talk by highlighting some challenges and benefits of capital market development for the banking sector. The Thai financial system consists of four main institutional categories, in the order of their importance: the banking sector, the capital market, specialized financial institutions and non-bank financial intermediaries. The first two categories are the backbone of the Thai financial system, while the third provides funding for specific developmental purposes in accordance with the government policy, and the last supplements the others. Despite the stock exchange boom last year and the pick up of the bond market in recent years, the banking sector remains the primacy of our financial system in every sense. Not only does it provide the bulk of lending that amounted to about 5.5 trillion baht as of end-2003, or equivalent to 93 percent of GDP, the banking sector also mobilizes savings from the public and provides means of payment and settlements that sustain the well-functioning economy. With the recapitalization effort and commendable operational improvement, the banking sector has emerged much stronger after the 1997 crisis, with all performance indicators pointing to the direction of resiliency. The banking sector’s net profit has turned positive for the past three years; this figure more than doubled in 2003 from the previous year.
Since pegging these crypto-assets to central bank money – the only legal tender in our monetary system and hence its anchor – is complex and tricky, to say the least, allowing such settlement assets to spread unchecked could affect the transmission of monetary policy and undermine financial stability. II. Our three levers for responding to these challenges I would like to share with you what we are doing to respond to these challenges. The Banque de France is working on three complementary areas: regulation, facilitation and experimentation. A) The first of these stems from the observation that security depends on having an appropriate regulatory framework in place that guarantees financial stability, but also encourages financial innovation in order to enhance end-user services and system performances. At the European level, we have welcomed and are supporting the proposed Markets in Crypto-Assets (MiCA) regulation and the Digital Operational Resilience Act (DORA), presented in September 2020:  With the publication of the MiCA proposal, the European Union was the first G20 jurisdiction to respond to the urgent need to regulate the crypto-asset market. We also support the Digital Operational Resilience Act (DORA). The text will create a harmonised framework for strengthening the IT security of the overall financial sector. I’m thinking in particular of cloud players, whose role in critical segments of the sector raises the question of whether they should be located in the European Union.