It is the first time in decades that the Finance Ministry and the central bank have had such a good understanding and level of mutual trust. The former governor of the central bank, MR Pridiyathorn Devakula, has stepped into the top post on the government's economic team and promoted his aide, Tarisa Watanagase, as his successor.

The bank's partially completed tasks, particularly drafts of the revised Bank of Thailand Act, Financial Institutions Business Act and Deposit Insurance Agency Act, are expected to be fully supported and unhesitatingly approved by the ministry within a year.

It is also highly unlikely now that the bank's monetary-policy implementation will suffer political interference, as was previously so often the case.

The main factor in this improved relationship is that Pridiyathorn knows how his former workplace operates and had already approved these drafts beforehand.

As finance minister, though, he can bear in mind the benefits to the ministry and does not need to follow the central bank's proposals.

His statements in the first few weeks in his new job have proved that he is on the Bangkhunprom Palace side and will speed up unfinished tasks.

"The cooperation will be good because he understands all the issues - what our problems are and how to solve them," said Tarisa, who is expected to be formally proposed as new central bank chief at tomorrow's Cabinet meeting.

The bank's assistant governor, Krirk Vanikkul, echoed Tarisa, saying that Pridiyathorn believed there should be no political interference at the bank.

Pridiyathorn looks likely to ensure that the bank's authority in supervising the banking industry will not be shifted to other entities.

It also looks likely that he will hasten the legal process of the three drafts to be approved in Parliament.

The Finance Ministry had earlier hesitated to endorse the drafts of the Bank of Thailand and Financial Institutions Business acts, believing that by them the central bank would have too much power.

The ministry once tried to remove the bank's financial-institution supervision authority, citing a conflict of interest with the bank's monetary-policy implementation.

In contrast, the bank believes the draft of the revised Bank of Thailand Act will clarify supervision and lift the banking system to international standards.

The draft of the Financial Institutions Business Act includes consolidated supervision and prompt corrective action.

It allows the central bank to oversee the entire picture of each bank's business and take action before problems arise.

The central bank would thus be able to supervise banks' risk management more efficiently.

The draft also provides the central bank with four options to intervene when a bank gets into trouble.

Depending on the level of the problem, this could involve a restructuring plan, changing executives, controlling the business or shutting down the bank.

Pridiyathorn believes that the draft should not include a fixed interest-rate spread, as proposed by some former senators, because it would go against the market mechanism of the banking business.

"I believe he will not amend the draft much. No one else in his position as minister would understand our issues," said central-bank assistant governor Samart Buranawatanachoke.

Pridiyathorn has also initially ap-proved the Bank of Thailand Act, authorising the central bank to put official reserves in bonds issued by highly rated foreign companies and international organisations.

He now has to convince the Cabinet and the National Legislative Assembly that the central bank's increased power will not deplete reserves.

In addition, the bank can expect its former governor not to intervene in monetary-policy implementation, as some politicians have in the past on the principle that inflation is the greatest menace.

If he does, he will risk being branded as just another politician interfering with the bank, which is supposed to be independent.

He will also risk being seen to go against the interim government's "sufficiency-economy" philosophy, which places stability above growth.

Anoma Srisukkasem

The Nation