1. Financial Sector Development Sustainable Growth, Regional Balance, Social Development for Poverty Reduction Bangkok, October 26, 2006 Renuka Vongviriyatham GE Money Retail Bank

2. More balance financial sector No. of financial institutions supervised by BOT declined Financial strength of Thai banks improved Loan growth in line w/ econ growth Thai Financial Sector: More Resilient to Shock Source: BOT & WB’s estimate Source: BOT & SEC & WB’s estimateSource: BOT & WB’s estimate

3. Major Reform Actions Several Master Plans being implemented Financial Sector Master Plan (2004-2009); Capital Market Master Plan II (2006- 2010); and Insurance Master Plan (2006) Master Plan for Grass Root Financial Services (draft) BOT ’ s supervisory policies, procedures, practices being strengthened & more transparent Some improvement in contract enforcement regime Formal out-of-court mediation framework established Special Bankruptcy Court established Legal execution process streamlined to expedite auctions of foreclosed assets Credit Bureau in operations and governing law amended Capital market development New Public Debt Law enacted (2005); Bond market information centralized; a central depository agency created Derivatives Law enacted; TFEX launched its equity future in 2006 Deregulation of consumer finance market

4. Reform Gaps Legal reform for contract enforcement and secured transaction Banking law & Central Bank law Limited deposit insurance – to enhance market discipline Amendments to Public Limited Companies law; Securities and Exchange law; Insurance Industry law Supervision of financial conglomerate and insurance industry Policy direction for state-owned financial institutions and its implementation (incl. risk management & CG & supervision) Restriction on issuance of gov ’ t securities Restriction on utilization of Credit Bureau information

5. Looking in Detail: Resiliency to Shock not Tested Performance varied Large private banks capable of weathering economic shocks Small players need to strengthen their franchises to compete Source: FitchRatings; Phatra Securities Interest Spread of Thai Commercial Banks

6. Areas for Improvement Resource allocation Efficiency; credit risk Source: BOT & WB’s estimate Asset quality Access to finance

7. Looking into the Future Saving for retirement & growth Are we saving enough? How to increase return on saving? Not only boost saving but not waste it Instruments More efficient financial intermediaries Balance bet. efficiency and stability Infrastructure & legal framework Market mechanism & supervision Effective exit mechanism Financial service liberalization Unavoidable When and how? Prepare for increase in volatility Access to finance SMEs Low income HH Source: NSO & WB’s estimate Source: NI 1980-2001 and NI 2004

8. Appendix

9. WB ’ s CDP-FC Program Launched in April 03 Subsequent to crisis responded assistance and CDPC – both emphasized short-term structural reform to cope with the impact of the financial crisis Geared toward medium-term issues of enhancing competitiveness of the financial and corporate sectors Concluded in June 06 The Country Development Partnership (CDP) is a knowledge- based partnership that provides support in terms of policy advice, third party technical assistance, and capacity building in response to the needs of the authorities. CDP-FC: CDP Financial and Corporate Sector Competitiveness CDPC: CDP Competitiveness

10. Strengthening financial sector strategy and structure Enhancing supervision and regulation Improving the speed and quality of corporate debt restructuring Enhancing intermediation on a risk-adjusted basis Improving corporate governance Developing capital markets CDP-FC ’ s Six Components

11. CDP-FC ’ s End Outcomes Promote sustainable growth Decrease vulnerability, frequency, and costs of downturns Improve resource allocation to most productive uses Ensure access to assets and income opportunities for all segments of society

12. CDP-FC ’ s Intermediate Outcomes 1. Strengthen the Financial Sector Strategy and Structure 2. Enhance Supervision and Regulation 3. Improve the Speed and Quality of Corporate Debt Restructuring 4. Enhance Intermediation on a Risk Adjusted Basis 5. Enhance Corporate Governance 6. Develop Capital Markets  Strengthen the financial sector strategy and structure  Improve the depth and efficiency of the financial sector  Enhance market discipline of deposit taking financial institutions  Increase access to financial services to SMEs and low- income household  Enhance supervision and capacity of supervisors for financial institutions  Improve framework to supervise financial conglomerate and better cooperation across regulatory agencies  Enhance disclosure by financial institutions  Improve speed and quality of corporate restructuring via TAMC  Improve the legal regime for credit enforcement  Improve out-of-court debt restructuring regime  Enhance level playing field between state and private financial institutions as well as between small and large institutions  Strengthen information infrastructure  Enhance corporate governance, disclosure, and accountability of Thai firms  Improve accounting and auditing standards and professionals  Strengthen the oversight and the accountability of the board of directors of public companies  Strengthen shareholders’ right  Enhance the depth and efficiency of domestic capital market as alternative source  Improve market liquidity and transparency  Primary market mechanism strengthened  The quality of supplies improved  Efficiency of the trading and the clearing & settlement platforms for securities trading strengthened  Improve risk management mechanism for market players