Capacity-building Needs in Strengthening Thai Financial System

1. Capacity-building Needs in Strengthening Thai Financial System Dr. Tarisa Watanagase Deputy Governor, Financial Institutions Stability Bank of Thailand

2. POOR RISK MANAGEMENT LED TO 1997 CRISIS • Lack of data/information • Extent, maturity of nation’s debt • Extent, maturity of individual’s debt • Lax measurement • Poor definitions of prudential ratios • Lack of tools, e.g. Credit bureau, scoring • Compliance-based monitoring • Poor awareness of risks • Lack of early warning system • Poor control due to: • Lack of mechanisms: stop loss, prompt corrective action plan • Weak infrastructure: legal, tax

3. AREAS THAT NEEDED MAJOR IMPROVEMENT • Supervision • Banking practice • Infrastructure

4. IMPROVEMENT IN SUPERVISION Approach • Adopt risk-focused regulations, best practices • Shift to risk-based examination • Put in place BOT’s risk management mechanisms Implementation • Create awareness • Get banks involved in drafting prudential regulation • Issue policy statements • Capacity Building • Set up BOT oversight board, early warning system, emergency plan

5. IMPROVEMENT IN BANKING PRACTICE Approach • Adopt good governance • Focus on risk management Implementation • Restructure Board to improve role, independence • Set up committees to improve governance • Put in place procedures/mechanism to manage risks: credit scoring, credit review, etc.

6. CAPACITY BUILDING During the past several years, Bank of Thailand’s supervisory capacity has greatly benefited from technical assistance provided by international organizations, regulators and foreign banks in such areas as: • Risk-based supervision and risk management • New Basel Capital Accord • Consolidated supervision • Good governance • International accounting and auditing

7. CAPACITY BUIDING (con.) Modes of technical assistance • Short-term • 2 days – 3 months training courses, seminars, workshops • Long-term • 6 months training, internships at foreign institutions • Resident advisors sponsored by foreign institutions • Establishment of School for Examiners • Curriculum design • Training of trainers • Development of teaching materials

8. BENEFITS OF TA • Staff gain advanced knowledge and skills, hands-on experience • Tools, infrastructure put in place e.g • Manuals • School for examiners • Commissioning process • Foundations for continued in-house trainings

9. CAPACITY BUILDING NEEDS GOING FORWARD • Supervisors, banking personnel needs: • Continued training in risk-based supervision and banking • Upgrade technical/quantitative skills to analyze risks (for Basel II) • Enhance financial engineering skills to develop new products, package risks

10. CAPACITY BUILDING NEEDS GOING FORWARD (con.) • The needs call for: • Continued training supports from foreign supervisors, banking experts, multinational agencies • New supports in local universities for inter-disciplinary curriculum integrating mathematics, finance, business, engineering, with possible sponsors from universities, public or privately run training institute, and banking industry