I. METHODOLOGY AND PROBLEM IDENTIFICATION (June 2000-2001)
In its first manifestation (June 2000-2001), the project’s emphasis was divided
into two parts namely market and supervisory reform. This dichotomy required analysts
to research leading financial markets and comparable peer, in order to distinguish
international financial trends and identify potential roles of deposit-taking financial
institutions, scope of business for each type of financial institution, possible structure for
conglomerates and universal banks, and the matching supervisory regime and interagency
coordination.
Together with the above activities, preliminary domestic stocktaking was
undertaken to ascertain shortcomings within each segment of Thailand’s financial
system. This included third party examination of the future direction of finance
companies and credit fonciers, surveys of service providers and corporate users, and a
system wide SWOT2
analysis.
As to be expected from a financial system that had undergone drastic economic
troughs, the studies revealed numerous inherent weaknesses and gaps in financial
services that needed to be addressed if Thailand is to prevent the reoccurrence of 1997,
and keep up with international financial trends. For example, financial institutions’
survey responses revealed that unclear rules and problems with interest rate
benchmarking tools were obstacles staunching capital market growth, while results of the
SWOT analysis showed how inadequate internal risk management practices and tools
left financial institutions unable to adequately measure, monitor and manage their
material risks.
The findings from these initial cross-country studies, surveys and SWOT analysis
were later used as background information for discussions by the Eminent Persons
Meeting,3
made up of financial experts from supervisory agencies, financial institutions,
large domestic conglomerate, and academia. Given the disparate nature of Thailand’s
financial system, coupled with the fact that this was only the first round of discussion,
much of the group’s proposals were fragmented. Nevertheless it was agreed that with the
right background information, a forum of experts could help crystallize the project’s
objective and vision.