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Edited by Andrew W. Mullineux and Victor Murinde
Chapter 17: Reforming the Traditional Structure of a Central Bank to Cope with the Asian Financial Crisis: Lessons from the Bank of Thailand
17. Reforming the traditional structure of a central bank to cope with the Asian ﬁnancial crisis: lessons from the Bank of Thailand Andrew W. Mullineux, Victor Murinde and Adisorn Pinijkulviwat* 1 INTRODUCTION The Bank of Thailand (BoT) became Thailand’s central bank on 10 December 1942, and like all traditional central banks was entrusted with a broad range of traditional functions: to issue currency; to safeguard the value of money; to promote monetary stability and a sound ﬁnancial structure; to promote economic growth; to act as the bankers’ bank and provide lender-of-last-resort facilities; and to act as banker and ﬁnancial adviser to the government.1 During most of its history, the BoT played an important role in promoting the development of ﬁnancial institutions and markets in Thailand. However, following the Asian ﬁnancial crisis which broke out in 1997, the BoT became vulnerable as Thailand started to experience a severe economic crisis. The crisis derailed all ongoing ﬁnancial reforms and directly crippled the banking sector, the stock exchange and the foreign exchange market (McKinnon and Pill, 1998). Regarding the banking sector, the major problems associated with the crisis included: failure of ﬁnancial institutions; insuﬃcient bank liquidity and inadequate capital; high non-performing loans; and loss of momentum in rebuilding conﬁdence among international investors, depositors and economic development organizations, potentially limiting future capital ﬂows into Thailand. In this context, it is interesting to examine how a traditional central bank, like the BoT, is able to cope with a ﬁnancial crisis of a magnitude...
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