While I believe these measures would be welcomed by the private banks and their clients as they offer greater convenience and flexibility, I must remind everybody that the core objective of our regulatory framework continues to be investor protection. So private banks must ensure that they have in place the necessary systems and internal controls to implement the portfolio based approach and other related measures to facilitate the investment process. BIS central bankers’ speeches  3  In this regard, it is hard to overstate the importance for private banks to have proper documentation. Proper documentation helps bank management monitor staff’s sales practices and detect deficiencies. Proper documentation also provides audit trail and evidence on the sales process. A bank with proper documentation will be in a much better position to demonstrate that it has properly discharged its duties to its clients in the event of a dispute or complaint. Enhancing competency of industry practitioners Let me move to another pillar that is necessary to support the continued success of Hong Kong’s private banking industry: namely the availability of professional talents. Institutions can only be as strong as the people that make them up. How the world perceives the standard of our financial services depends crucially on the quality of the people delivering such services. Private banking clients now demand quality and efficient services that are tailored to their specific investment needs. Meanwhile, the financial markets have become more complex and volatile.

This involved seven new legislation that have been enacted in the areas of central banking, the payments system, money services, deposit insurance, and the regulation of the banking, insurance, Islamic finance, development financial institutions and cooperatives. This has given greater certainty and predictability in the functioning of the financial system. Importance was also given to strengthening the surveillance capabilities of the Central Bank and the effectiveness of the regulatory and supervisory regime. This involved the transition from a rule-based regulation to an enhanced principle-based regulation regime with focus on governance practices and risk management. This was reinforced by the shift to a risk-based supervision. The supervisory oversight has however continued to remain intrusive, with a pre-emptive intervention framework to ensure that the potential risks to financial stability  BIS central bankers’ speeches  3  would continue to be addressed including in a more regionally and internationally connected financial sector. In parallel with these efforts was the development of the securities market. From a financial system in which there was an over-reliance on the banking system for financing, the financial system has now become more diversified with greater access to financing from the bond and sukuk market. The domestic securities market has now evolved to become a vibrant part of the Malaysian financing ecosystem, and has served to disperse the concentration of risk in the financial system thereby contributing towards preserving financial stability. The Malaysian securities market has expanded significantly to become the largest in the ASEAN region.