Zeti Akhtar Aziz: Improving and expanding Malaysia's cross-border
financial flows and capital market transactions
Speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia (Bank Negara
Malaysia), at the Official Launch of the Expansion of SWIFT Office in Kuala Lumpur, Kuala
Lumpur, 24 November 2014.
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It is my pleasure to be here today on the occasion of the opening of this expanded SWIFT
Kuala Lumpur Corporate Services Centre. We are most honoured with the presence of Her
Royal Highness Princess Astrid of Belgium. Allow me to, first of all, welcome Her Royal
Highness Princess Astrid of Belgium. It is also my pleasure to welcome His Excellency Didier
Reynders, Federal Deputy Prime Minister and Minister of Foreign Affairs and European
Affairs of Belgium, and His Excellency Pieter De Crem, Federal Secretary of State for
Foreign Trade of Belgium to Kuala Lumpur. It is my honour to address such a distinguished
gathering including the practitioners from the financial fraternity.
We are pleased to welcome the expansion of the SWIFT office in Kuala Lumpur. Malaysia
has aspired to be an important destination for international corporations and organisations to
operate in. Malaysia has well-developed infrastructure, a dynamic workforce and
costcompetitive environment to provide an enabling environment for mutually reinforcing benefits.
Malaysia is now home to more than 5,000 foreign companies from more than 40 countries.
Additionally, it also includes global and regional shared services hubs that serve
worldleading financial services providers and international corporations. Malaysia is also the host
to a number of the international institutions in the area of finance that include the Islamic
Financial Services Board, and more recently, the Alliance for Financial Inclusion. We are
very pleased that SWIFT, an important market infrastructure service provider to the global
financial community, has selected Kuala Lumpur as its Corporate Services Centre.
Malaysia's financial sector has in this recent decade made significant strides in facilitating the
country's cross-border economic linkages with other economies. Malaysia is part of a vibrant
region, comprising ASEAN and of the greater Asia. The region has prevailing strong
foundations and significant growth prospects with strong inter regional connectivity.
Malaysia's volume of cross-border trade and foreign exchange settlements with ASEAN
economies alone has grown at an average rate of 10% in the recent four years, reflecting
Malaysia's increasing integration with the regional markets. A vibrant foreign exchange
market has supported this growth, where the overall Malaysian foreign exchange market
volume has increased by more than five-fold in a period of 8 years to USD11.1 billion per
day, at a ratio of about 6 times of total trade. Like most regional blocs, the integration
process for ASEAN seeks to promote greater regional connectivity which will in turn expand
and reinforce the region's growth potential. The aim of reinforcing the regional linkages in the
payment and settlement systems is to enable the establishment of risk mitigation
mechanisms such as Payment versus Payment (PvP) and Delivery versus Payment (DvP) to
reduce the foreign exchange and securities settlement risk. Since the ASEAN region is
largely within the same time zone, the ultimate aim is to achieve same day settlement and
funds availability.
In this regard, the ASEAN Working Committees have been working to create an enabling
environment to promote efficient and effective linkages for intermediation of cross-border
financial flows and capital market transactions. A crucial pre-requisite to this is the adoption
of common messaging standards and platform such as that provided by the SWIFT global
messaging standard to facilitate interoperability and efficient processing of transactions.
Market infrastructure service providers, and operators of payment systems, and the banking
industry, have a significant role in supporting this financial integration process, while ensuring
safety, reliability and security. I understand SWIFT and the Association of Islamic Banking
Institutions Malaysia and other stakeholders in the Malaysian Islamic financial community are
also collaborating on the development of a new rulebook for the usage of SWIFT messages
for Islamic financial transactions. This will provide an efficient platform for the exchange of
messages for Islamic finance transactions based on such standardised formats and bring us
a step further at the frontier of Islamic finance.
Let me now turn to the developments in Malaysia's payment system. The Malaysian payment
system is undergoing a major transformation. Like other successful financial market
infrastructure globally, concerted efforts are being made to enhance the reliability, security,
efficiency and inter-connectedness of the Malaysian payment system for the benefit of all
stakeholders in the payment value chain.
For large value payment system, RENTAS, the systemically important payment system for
transfer and settlement of high value interbank funds and scripless securities transactions, is
continuously being enhanced to support cross-border payments and settlements. In this
regard, a Payment versus Payment infrastructure for interbank settlement of USD/RM trade
transactions was implemented in 2006 in collaboration with Hong Kong Monetary Authority
and a cross-border link with Euroclear was established in 2012. In addition, RENTAS has
also been equipped with the capability to support Renminbi denominated funds and
securities transactions.
On the retail payment front, measures are also geared towards enhancing the efficiency,
accessibility and quality of retail payment infrastructure and services. To this end, Bank
Negara Malaysia has focused on creating the enabling environment to accelerate the
country's migration to electronic payments (e-payments), to enhance economic efficiency
and increase our competitiveness. This has been done by establishing a conducive pricing
and incentive structure, enhancing the e-payment infrastructure and promoting awareness
and confidence in the use of e-payments. These initiatives to modernise our financial system
has already begun to yield results bringing about the desired cost savings.
In concluding my remarks, let me congratulate SWIFT on this occasion of the expansion of
their operations here. I also wish the management and staff of the Kuala Lumpur Corporate
Services Centre every success in your endeavours and look forward to its contribution to our
economy as we advance forward in this significantly challenging and rapidly evolving
economic environment.