How Bank of Thailand & elected govts work together

The Bank of Thailand governor himself explains "central bank independence" & how the bank works with elected govts for long-term economic stability.



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Economics

Central bank governor defends passive role

Goal is for stability, not to spur growth
9/10/2012
Parista Yuthamanop

The Bank of Thailand's operating objective is to maintain economic stability conducive to growth rather than proactively pursuing it, says governor Prasarn Trairatvorakul.

The relationship with governments is a challenge, says Dr Prasarn.

"Our goal of stability will lead to credibility, which will prevent long-term bond yields from jumping on inflation fears. If we can create confidence that we have discipline, then we can support growth in the long term," Dr Prasarn said in an interview with the Bangkok Post.

The central bank has been at loggerheads with the Yingluck Shinawatra-led government since it came to office a little over a year ago. Among the high-profile conflicts is how to clear the liabilities of the 1997 financial bailout fund worth 10% of annual economic output.

The government later enacted two laws after last year's floods to push for the central bank's expansive role. One addressed the Financial Institutions Development Fund's debt problem by demanding the central bank manage it. This has forced the regulator to collect a higher deposit protection fee to pay for the interest, while the repayment of the principal is to come from returns on official reserves.

The other law empowers the central bank to issue soft loans worth 210 billion baht to match commercial banks' lending to flood victims.

It is also not unusual to see ministers, advisers or politicians publicly express their wish to see the central bank reduce interest rates...

...Dr Prasarn said the amendment to the Bank of Thailand Act of 2008 has enhanced the independence of the central bank. But it is public opinions and feedback, rather than laws, that most effectively support the central bank's independence and shield it from politics....

...The 2008 law, which balances the governor's power to decide on the policy interest rate with external members through the Monetary Policy Committee has helped to reduce tensions with governments, which sometimes led to the dismissals of central bank governors in the past, Dr Prasarn said.

The central bank is required by law to discuss the inflation target each year with the Finance Ministry, which will submit it for cabinet approval. Dr Prasarn said this gives the government a role in setting monetary policy.

"So the central bank is not an independent state per se. But once the target has been set by the government, we are supposed to have independence in selecting tools and timing for execution. It's independence in operations rather than in goals," he said.Dr Prasarn said the central bank has attempted to tread a fine line to voice opinions during the past two years in various forums....

(Source: Bangkok Post, Economics, Central bank governor defends passive role, Goal is for stability, not to spur growth, 9/10/2012, Parista Yuthamanop, link

 
Central Bank Vocabulary

central bank - the Bank of Thailand; the main government bank in a country that controls the supply of money credit (loans) in a country and provides financial services to the government and other banks (See Wikipedia)
central bank governor - the head of the central bank

policy - a plan of action to guide decisions and achieve outcomes นโยบาย (See Wikipedia)
monetary policy - the way in which the central bank controls the supply of money and credit (loans) in an economy, by setting a policy interest rate for the loans that the central bank makes to other banks, for example (See Wikipedia)

independence - not being influenced by or dependent on other people เป็นหน่วยงานอิสระ
central bank independence - the idea that there should be limits to how an elected government can change central bank policy, to increase economic growth before an election that might lead to higher inflation in the long-term, for example (See Wikipedia)

independent - free from outside influence, separate and not connected to other things เป็นอิสระ
state - government รัฐ
independent state

per se -
considered by itself
the central bank is not an independent state per se

passive - accepting events that happen (without trying to change, react to or influence them)  อยู่เฉยๆ, ซึ่งไม่มีปฏิกิริยา
role - the position or purpose that someone or something has in a situation, organisation, society or relationship บทบาท
passive
role

defend
- ปกป้อง
central bank governor defends passive role

stability - does not move suddenly by large amounts (in an unpredictable and surprising way) ความมีเสถียรภาพ ความมั่นคง
economic stability

spur - to cause something to happen ก่อให้เกิด
spur growth

goal is for stability, not to spur growth

objective - what you plan to achieve; goal; aim; purpose เป้าหมาย
operating objective

conducive to -
creating a situation that helps something happen  ที่นำไปสู่, ที่ทำให้เกิดขึ้น
conducive to growth - creating a situation that helps growth happen

maintain - to keep รักษา
maintains economic stability conducive to growth

pursue a goal - take some action to achieve a goal

proactively - acting early to solve problems before they even occur
proactively pursue a goal

The Bank of Thailand's operating objective is to maintain economic stability conducive to growth rather than proactively pursuing it, says governor Prasarn Trairatvorakul.

relationship - the way in which two or more things, people or organizations are connected, linked or related ความสัมพันธ์
the relationship with governments

challenge - something that needs a lot of skill, energy, and determination to deal with or achieve สิ่งที่ท้าทาย, การท้าทาย
the relationship with governments is a challenge

credibility - the degree to which something can be believed or trusted ความน่าเชื่อถือ, ความน่าไว้วางใจ
our goal of stability will lead to credibility

bond -
an agreement by a government or an organization to pay back the money an investor has lent plus a fixed amount of interest on a particular date; a document containing this agreement (See Wikipedia)
bond yields -
the income that you get from investing in bonds
long
-term bond yields

inflation - the level of prices rising in the economy as a whole  ภาวะเงินเฟ้อ
inflation
fears

confidence -  feeling sure about something; the quality of being certain ความมั่นใจ ความเชื่อมั่น
create
confidence

discipline - control; following rules and standards of behaviour, forcing others to follow these rules ปฏิบัติตามระเบียบข้อบังคับ
have
discipline

support - helpe สนับสนุน
support growth - help economic growth
support growth in the long term

interview - to ask someone questions in a meeting for a newspaper article, television show, etc. The noun form is also interview สัมภาษณ์, การสัมภาษณ์
interview
with the Bangkok Post

The relationship with governments is a challenge, says Dr Prasarn. "Our goal of stability will lead to credibility, which will prevent long-term bond yields from jumping on inflation fears. If we can create confidence that we have discipline, then we can support growth in the long term," Dr Prasarn said in an interview with the Bangkok Post.

at loggerheads with - disagreeing with, having an argument or fight with
came to office - start serving in a political position (such as MP or Prime Minister)

high-profile - very visible; known by everyone (well-known, famous)
conflicts - angry disagreements between people or groups ความขัดแย้ง
high-profile conflicts


bailout - help someone out of difficult situation by giving them money ช่วยไม่ให้ธุรกิจล้มละลาย
fund - money kept to provide money for something เงินทุน กองทุน

bailout fund - money kept for a bailout
the 1997 financial bailout fund

liabilities - money that an organization owes to other people; debts หนี้สิน หนี้ขององค์กร
clear liabilities -
pay back debt (pay back the money borrowed to the lender)
clear
the liabilities of the 1997 financial bailout fund

annual - happening once a year ประจำปี
annual economic output
10% of annual economic output

The central bank has been at loggerheads with the Yingluck Shinawatra-led government since it came to office a little over a year ago. Among the high-profile conflicts is how to clear the liabilities of the 1997 financial bailout fund worth 10% of annual economic output.

enacted - made a proposal into a law ยื่นร่างกฎหมาย
enact laws - make new laws

debt - an amount of money that you owe หนี้
the Financial Institutions Development Fund's debt problem

fee - an amount of money that you pay to be allowed to do something ค่าธรรมเนียม, ค่าตอบแทน, ค่าบริการ
deposit protection fee

interest - payments made for the use of another's money for a period of time
regulator - an official who makes certain that the companies who operate a system work effectively and fairly ผู้มีอำนาจควบคุม

regulator
to collect a higher deposit protection fee to pay for the interest

principal - the amount of a loan
the repayment of the principal

official - approved by the government or some authority ที่เป็นทางการ
reserves - the amount of foreign currency or gold held by a national bank, which is used for dealing with the national banks of other countries เงินสำรอง
official reserves

returns - the money you make from holding some asset or investment (the interest it pays during a period of time or increase in price)
returns on official reserves

soft loans - loans with easy terms for the borrower (examples:: lower interest rate, longer pay back period, etc)

issue - offering securities (stock shares, bonds) for sale
issue soft loans

empower - give the power to do something
the  law empowers the central bank to issue soft loans

victims - people who are killed injured or harmed in some way from an accident, natural disaster, crime, etc.
flood victims

lending
- giving money to someone who agrees to pay it back in the future การให้ยืม
lending to flood victims

match - to be or look the same as or very similar to something else ซึ่งไม่คู่ควร
soft loans to match commercial banks' lending to flood victims

advisers - experts who tell managers and decisionmakers what they should do
publicly express their wish to see the central bank reduce interest rates

The government later enacted two laws after last year's floods to push for the central bank's expansive role. One addressed the Financial Institutions Development Fund's debt problem by demanding the central bank manage it. This has forced the regulator to collect a higher deposit protection fee to pay for the interest, while the repayment of the principal is to come from returns on official reserves. The other law empowers the central bank to issue soft loans worth 210 billion baht to match commercial banks' lending to flood victims. It is also not unusual to see ministers, advisers or politicians publicly express their wish to see the central bank reduce interest rates...

amendment - a change in a law
amendment to the Bank of Thailand Act of 2008

enhance - make stronger; add value to
enhanced the independence of the central bank

feedback - when output from an event in the past influences the same event in the future (when an event is part of a chain of cause-and-effect that forms a circuit or loop, the event feeds back into itself (See Wikipedia)
public opinions and feedback

effectively - working well and producing the results that they wanted
laws, that most effectively support the central bank's independence and

shield - something that protects you from harm เกราะป้องกัีน เกราะ
shield central bank from politics

rate - อัตรา
interest rate - the percentage of a loan that must be paid to borrow money from someone
policy interest rate - the interest rate set by the central bank as part of monetary policy

the governor's power to decide on the policy interest rate with external members through the Monetary Policy Committee

tensions - the feeling caused by a lack of trust or disagreements between people, groups or countries who do not agree about something and may attach each other ความตึงเครียด

reduce tensions with governments

dismissals
- to take a person's job away from them (fire a person from a job)
dismissals
of central bank governors in the past

...Dr Prasarn said the amendment to the Bank of Thailand Act of 2008 has enhanced the independence of the central bank. But it is public opinions and feedback, rather than laws, that most effectively support the central bank's independence and shield it from politics ...The 2008 law, which balances the governor's power to decide on the policy interest rate with external members through the Monetary Policy Committee has helped to reduce tensions with governments, which sometimes led to the dismissals of central bank governors in the past, Dr Prasarn said.

target - a goal; the amount you are planning to achieve เป้าหมาย
inflation target

submit - officially give a document to an organisation so that can make a decision about it ยื่น (เอกสาร) เพื่อการพิจารณา
approval - official permission to do something การอนุมัต
submit it for cabinet approval

timing - the choice of the right time to do something (to take action)
execution - doing a project เริ่มดำเนินโครงการ
independence in selecting tools and timing for execution

tread -
walk
fine line -
a very thin line
tread a
fine line - meaning: they have to act very carefully (they are in a dangerous and sensitive situation)

voice - to express your feelings or opinions ออกความคิด
voice opinions - to tell people what you think about something

forums - a place on the internet or face-to-face where people discuss issues or peoblems (share their opinions, debate or even fight about issues)

The central bank is required by law to discuss the inflation target each year with the Finance Ministry, which will submit it for cabinet approval. Dr Prasarn said this gives the government a role in setting monetary policy. "So the central bank is not an independent state per se. But once the target has been set by the government, we are supposed to have independence in selecting tools and timing for execution. It's independence in operations rather than in goals," he said.Dr Prasarn said the central bank has attempted to tread a fine line to voice opinions during the past two years in various forums....

About the author

columnist
Writer: Jon Fernquest
Position: Online Writer