In this case, waiting for the passive runoff of the additional assets alone may not be a viable interest rate implementation strategy. Depending on the details of the operating framework and money market structure, other tools might be needed – at least for some time – to control overnight interest rates above the zero bound while the size of the balance sheet remains elevated. What we learn about these tools through the period of normalization could prove useful when we think about our long-run framework. Central bankers around the world have been innovative in developing tools to address recent challenges and to prepare to normalize their operations, and overall, the set of implementation options at our disposal may be much broader than we thought before the crisis. So let’s fully explore the operational issues underlying these options. A deeper understanding will help inform the choices policymakers need to make in order to meet their goals. Now seems like a particularly good time to start such an effort, for several reasons. First, we need to digest the lessons from the recent crisis with respect to monetary policy implementation and money market functioning, and it is best to do so while the experience is still fresh in our minds.
Some differences in our practice as compared to international standards may not warrant any further action at all, for they reflect our conscious intention to adopt rules that best suit our own unique situation as well as rules that should be phased in gradually to comply with international standards only at an appropriate time. We welcome the opportunity to discuss and share this understanding with the FSAP assessors, who are drawn not only from IMF and World Bank staff but also from other countries’ central bankers, regulators, and international experts. Before I let you get on with the workshop, I would like to conclude by saying that, with or without the FSAP, the Bank of Thailand will continue to strive for a safe and sound financial system, both through efforts to restructure financial institutions under the Financial Sector Master Plan, and through continued strengthening of prudential standards and supervisory practice. Risk-based supervision approach has been adopted. Loan classification and provisioning requirements have been and will be tightened further. Good corporate governance has been enforced, including appropriate composition of the Board of Directors and, most recently, fit and proper criteria for the top management of commercial banks. We have come a long way since the 1997 crisis and we do not intend to look back. Yet, many formidable challenges lie ahead. On the international front, a lot of preparations and adjustments are needed in response to the introduction of IAS39 and the new Basel Capital Accord.