BOT 'must improve'

Veerathai Santiproabhob, Siam Commercial Bank (SCB) executive vice president, said the BOT had a big challenge to build up its role in line with changes in "market power", linkage and speed, involving not only the financial and foreign-exchange markets but also other markets such as goods, labour and capital.

The central bank should improve its role as market guide to increase efficiency of monetary policy, he said at a seminar on the BOT's role hosted by Thammasat University.

Veerathai suggested the central bank send gradual signals and create proper market expectations, which would help the market to react to the signals correctly. For example, investors in the bond market had unwound their positions after the BOT's much anticipated statement that the policy interest rate would remain unchanged, he said.

To make the gradual signals work properly, the BOT should understand the deep linkages between the financial and goods markets and the real estate sector as a micro foundation for the macro-economy. He also suggested that the BOT's supervision should be based more on business judgement and financial liberalisation.

"The BOT should adopt consultative communication with the market, or have two-way communication. Earlier, it used to issue any regulation and then just inform the banks about it," Veerathai said.

Chodechai Suwanaporn, director of the Finance Ministry's Fiscal Policy Office, proposed that the BOT give more opportunity for the government and related agencies to make recommendations on monetary policy, since the government is responsible for the overall economy and answerable to the people. "The BOT should invite experts from the private sector to give advice on monetary policy, including from foreign countries such as Germany and Japan," he said.

Chodechai said the Monetary Policy Committee (MPC) should also cover foreign-exchange policy so that the monetary and foreign-exchange policies worked together, unlike last year when the central bank did not slash the policy rate before introducing the withholding reserve of 30 per cent.

BOT deputy governor Atchana Waiquamdee argued that the management framework for the central bank's international reserves already included approval from the MPC. The BOT's foreign reserves were operated with good risk management. For example, reserve selling would not exceed earlier buying, she said.

Wichit Chaitrong,

 Anoma Srisukkasem

The Nation