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Published on March 7, 2008

But far from anything being amiss, they will find that the unprecedented visit is simply the central bank's so-called "off-site" supervision - part of the BOT's routine annual meeting with the banks. Only this time, the deputy governor will appear in person.

The off-site supervision, which usually occurs in the early months of the year, involves BOT officials visiting the banks to see how their operations are running and whether their risk management is up to scratch. Mostly, the BOT will be making sure the banks are following business plans submitted earlier.

This time, the BOT delegation will include not only mid-ranking officials, but also Bandid. He reportedly wants to focus on the banks' risk-management planning. The BOT has been warning since late last year that 2008 will be volatile, due mainly to fluctuations in oil prices and the foreign-exchange market, as well as the consequences of economic recession in the US.

For the first time, the BOT is demanding all banks perform "stress tests" as part of their contingency plans for "things going wrong".

 The BOT will send them assumptions of various scenarios and ask the banks to formulate plans for coping with each scenario. This is part of the new Basel II international banking standard.

The assumptions will include "credit risk", due to lower-than-expected growth in the gross domestic product, because of low exports and investment; "market risk", due to changes in interest rates; foreign-exchange rates and equity prices; and "liquidity risk", due to the Deposit Insurance Agency Act.

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