Once the risk management Committee has been established, the Board will be able to control risks through this Committee and define types of risks that have to be closely monitored. In addition, the Committee would also responsible for setting up measures to deal with those types of risk, including the process on risk assessment and control. The contingency plan is needed to control risks in timely manner and minimize those risks to be at the acceptable level. This includes the reporting process on risk status to the Committee and Board of Directors with simple and clear message. With such practices, the Board of Directors could fully monitor risk management with appropriate decision, supporting by the Risk Management Committee. On the division of responsibility between the Board and the Risk Management Committee, the Committee should have authority to directly oversee all risks arising from normal course of business, while the Board of Directors should be responsible for approval of the risk management policy framework proposed by the Risk Management Committee, such as approval of aggregate exposure limit to FX risk, and individual limit by transactions and traders; maximum value at risk for interest rate risk; on credit risk, setting aggregate, individual, as well as group large exposure limit to certain types of credits and borrowers, or certain groups, to prevent over concentration. BIS Review 25/2006  3  On top of setting proper risk management framework and risk limits, the directors should also be on guard against situations where normal risk management cannot fully cover.
This year should mark the historic new chapter for the nation’s payment system, where we would see the transfer of the  BIS Review 25/2006  1  payments operation function from the Bank of Thailand to the private sector. This would provide greater flexibility for the system to adapt to the fast changing modern payments system development. Moreover, the recent announcement by the Thai Bankers Association of a major reform in the price structure of various payment media, including cheques, provides an important milestone towards a more efficient payment services. The move reflects a pricing based on the cost of various means of payments which would quickly eliminate inefficiency and costs to commercial banks. Another major achievement that calls for celebration is the significant reduction in the NPL last year. Thai banks have succeeded in bringing NPL down from 556,998 million baht, or 11.82 percent of total loans at the end of 2004, to 461,439 million baht, or 9.05 percent of total loans at the end of last year. In all, the NPL was brought down by a net amount of 95,559 million baht, the largest such decline since 2001, as a consequence of the recovery of the economy and improvement in business conditions. I am confident that this year will see an even more decline in NPL than last year. Moreover, the Financial Institution Development Fund has just completed the merging of Bangkok Asset Management Company, or BAM, with Asset Management Corporation or AMC.