The last easing in the latter part of 2012 was intended to provide an additional cushion against the impact of global economic slowdown and to further bolster domestic demand to sustain growth momentum. These policy decisions were deemed consistent with keeping inflation within the target range, as well as maintaining the overall financial stability. In fact, the first joint meeting between the MPC and the Financial Institutions Policy Committee (FIPC) took place last year, where the two committees shared their perspectives and information, as well as discussed in depth potential sources of systemic risk that could arise from economic and  BIS central bankers’ speeches  1  financial linkages. Regarding capital flow policy and in collaboration with the Ministry of Finance, the BOT continued to relax regulations to promote outward investment and foster more balanced capital movements. A clear lesson from the recent global financial crisis is that a good conduct of monetary policy alone does not necessarily guarantee a sound and stable financial system. As a result, central banks around the world have stepped up efforts to strengthen the supervision of financial institutions, improve risk management, and place a greater emphasis on monitoring systemic risks. Last year, the BOT introduced the Basel III capital regulatory framework with focus on improving capital quality, increasing capital base to provide cushion in the event of a crisis, and strengthening risk management procedures, especially in the realm of credit risks.
A key part of this is to make certain that banks and financial markets perform their functions efficiently, and that their business poses no systemic threat to the financial sector and the economy. Hence, for a long time now, the main focus of bank regulation and supervision have been to ensure that banks manage their exposure to risk effectively. These include exposure to credit risk, market risk, liquidity risk, and operational risk. Much progress has been made in honing the approach for a more accurate assessment and a more effective management of risk, culminating in the Basle II, which is a global standard for bank’s risk management. BIS Review 18/2008  1  But, in spite of what has been achieved, mishaps can and do happen. From time to time, we still read about banks suffering large losses that originate from the under-management of these risks. More often than not, the losses are linked to a breach of internal controls or systems that have been put in place to rein in excessive risk-taking in the first place. Ladies and gentlemen. On the security risk aspect, the growth of electronic banking and real-time funds transfer have made the challenge of risk management even greater, as the nature of security risk to banks has shifted considerably. Clearly, the main concern now is not so much about ensuring property security or preventing theft of physical assets, but about ensuring information security and preventing identity theft.