Muhammad bin Ibrahim: Strengthening Malaysian financial markets
Remarks by Mr Muhammad bin Ibrahim, Governor of the Central Bank of Malaysia (Bank
Negara Malaysia), at the Signing of Collaboration Agreement between Financial Markets
Association of Malaysia (FMAM), Asian Institute of Chartered Bankers (AICB) and Asian
Banking School (ABS), Kuala Lumpur, 31 October 2016.
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The signing of this collaboration agreement between ACI - Financial Markets Association of
Malaysia (FMAM), the Asian Institute of Chartered Bankers (AICB) and the Asian Banking
School (ABS) marks another milestone in strengthening the Malaysian financial markets. The
focus of this agreement is to enhance the integrity, ethical standards and professionalism of
market participants.
This collaboration is not new. It dates back to 1995 from when the FMAM has been working
closely with Institut Bank-Bank Malaysia (currently known as AICB) to formulate and
undertake the entry exams for the Pasaran Kewangan Malaysia Certificate (PKMC) for the
dealers and brokers in the Malaysian wholesale financial markets. Bank Negara Malaysia's
code of conduct of 1994 had made it mandatory for all dealers and brokers to be authorised
and to secure a pass in the PKMC exam as a pre-condition to practice in the treasury
domain. Since the introduction of the PKMC, a total of 2040 dealers and brokers, including
Bank Negara Malaysia dealers, have graduated and this certification is now seen as an
industry standard to be recognised as a professional dealer or broker.
What is noteworthy is that we are among the few countries in this region which require all
dealers and brokers to undergo certification through a professional qualification examination.
Synergistic Collaboration in Raising Professional Standards
The FMAM, since its establishment, has taken various initiatives to continuously enhance the
professionalism of its members and is directly involved in upholding the high standards of
PKMC certification. As things stand, I am told the threshold for passing the PKMC
examination is already high. The strengthened collaboration with AICB together with decades
of experience in education and certification, combined with the high quality delivery
standards of the Asian Banking School, form a potent formula in harnessing synergies for
raising professionalism and ethical standards for the Malaysian financial markets industry. I
would expect the curriculum, design, programme delivery and examination of PKMC to be
continually enhanced to remain relevant and current, in keeping up with the rapidly evolving
financial market environment in Malaysia today.
Moving forward, we should also aspire to raise the bar even higher by adopting more
advanced qualifications for the treasury industry that can build on the knowledge and
experience gathered through practice. I certainly look forward to seeing the day when such
qualification stands on par with other benchmarks such as the Chartered Financial Analyst
(CFA) or the Chartered Banker (CB) qualifications. The development of such enhanced
qualification will augur well for more fulfilling careers in treasury that will also provide broader
pathways for senior management and leadership positions in financial institutions.
Enhancing Integrity and Professional Conduct
Beyond the need for continuous development of knowledge and expertise, it is timely for
industry associations to play a greater role in self-regulating their members and to enforce
strict codes of conduct, professionalism and ethical standards. Maintaining high standards of
market conduct and ensuring the orderly functioning of financial markets is vital to ensure
continued public confidence in our financial system. This is because financial markets have
important linkages and interdependencies to the promotion of monetary stability and financial
conditions of the economy.
In recent years, there have been many findings of serious market misconduct, ethical lapses
and compliance failures at financial institutions globally that has eroded public trust on the
integrity of financial markets. These institutions, in their pursuit of profits, have even coerced
each other in manipulating financial benchmark rates such as the LIBOR. As a result, we
have seen regulators in the United States, the UK and the European Union taking regulatory
actions against global financial institutions. Global banks were fined staggering amounts
(more than $9 billion) and criminal charges were pressed against dishonest traders and
brokers. Similarly, six global banks in the USA were ordered to pay more than $5.6 billion for
engaging in collusive practices that manipulate currency exchange rates.
We have no tolerance for such misconducts in our own markets. We must remain vigilant
and vigorous when it comes to any issue impacting the integrity of our markets or its
participants. Regulators and associations around the world are working towards enhancing
public confidence through strengthening regulations and rules which govern market conduct.
For example, the International Organization of Securities Commissions (IOSCO) issued the
Principles for Financial Benchmarks in April 2013 to enhance the integrity, reliability and
oversight of benchmarks. Recently, in the EU, the European Market Infrastructure Regulation
(EMIR) also issued the Market Abuse Regulation to increase market integrity and investor
protection.
In Malaysia, continuous efforts have been taken to preserve integrity and maintain
confidence in our financial markets. For instance, Bank Negara Malaysia recently issued an
enhanced policy document on corporate governance with emphasis on behavioural norms,
corporate culture and ethics. In addition, the active engagement between FMAM and AICB
has led to this official collaboration which seeks to strengthen the framework for enforcement
of the code of conduct for their members.
To complement and further strengthen this, I am delighted to announce that today Bank
Negara Malaysia is launching a consultation paper on a new Code of Conduct for the
Malaysia Wholesale Money and Foreign Exchange market. We invite comments from
market participants and the general public, including corporations that may deal in the
wholesale financial market.
This Code of Conduct will be adopted by the industry and scope all activities within the
foreign exchange and money markets as well as activities of regulated entities in other
markets as well. Hence, the Code of Conduct will also be applicable to fund management
companies, corporations and providers of electronic trading or broking systems that deal in
the wholesale financial market, as well as interbank players in the bond markets.
The Code of Conduct sets out very clear principles and standards to be observed by market
participants and lays out the role of industry associations in preserving market order and
stability. It will also include enhanced requirements for institutions to have robust systems
and internal controls to safeguard the professionalism and integrity of the financial markets.
With the Code of Conduct, we expect the financial market community to develop and
maintain a corporate culture that emphasises the importance of professionalism and ethical
standards, compliance with laws and regulations and consumer protection. All of these will
be supported by strong and effective oversight by senior management. Explicit
responsibilities will be placed on the senior management to set "the right tone from the top" in
shaping the core values and culture of the institution.
Conclusion
A good culture can be supported but cannot be achieved solely by regulation. All parties
must play their respective roles in ensuring a safe, sound and trusted financial system that
upholds the highest standards of professionalism and integrity. I urge all of you here today as
stewards of the financial institutions to do your part in transforming the financial landscape by
relentlessly pursuing these desired outcomes. Collectively, we can make meaningful and
definitive changes to ensure that our workforce is best in class in assimilating a sound
corporate culture, professionalism and high ethical standards.