Several banking institutions have embarked on customer relationship management systems to better understand the needs of their customers in order to provide better levels of service and to gain a better understanding of their drivers of profitability. In the area of corporate governance, the hybrid approach adopted by Malaysia includes legal reform, self-regulation as well as measures to encourage market-based regulation. New measures were introduced to further improve the level of governance among banking institutions. This includes limiting the number of directorships of chief executive officers, reviewing the responsibility and accountability of the board and management as well as requiring for the setting up of various board committees. Emphasis on improved corporate governance goes hand in hand with the call for improvements in risk management standards. Arising from the experience during the Asian financial crisis, greater emphasis has been placed on enhancing the credit skills and to create a more robust credit culture. An accreditation process was introduced, aimed at better equipping credit officers with the required skills. Efforts are also on-going to prepare the industry for an enhanced risk management regime under Basel II and to continuously provide the relevant input towards the development of the framework, particularly from the perspective of emerging market economies. A comprehensive 10-year consumer education programme was also introduced early this year. This is to raise consumer awareness and understanding on banking products and services and to educate the public on their rights and responsibilities in their relationship with a financial institution.

The recent enactment of the Payment Systems Act 2003 is also a testimony to the Bank’s commitment for greater payment system oversight, and to provide legal certainty to the finality of payment instructions carried out through major payment systems. Social responsibility of banking institutions Sustaining growth in emerging economies requires stability to be preserved in the macroeconomic environment, the financial system and markets as well as social environment. The responsibility of achieving social stability and development should no longer be the exclusive domain of the government. The focus on short-term returns should not be at the expense of long-term sustainability. It is increasingly being advocated that corporate social responsibility is an important part of the business environment. Corporate social responsibility refers to operating business in a manner will also contribute to economic development while improving the quality of life of the workforce and local community and society at large. The banking institutions, being the main provider of financing in the economy, need to assume a much greater role in contributing towards the long-term development of the small and medium-sized enterprises (SMEs). In developing the SME industry into strong and resilient enterprises, banking institutions need to reassess their relationships with the SMEs as financing alone will not guarantee the long-term success of the SMEs. The traditional relationship between creditor and debtor has to evolve into a business partnership whereby banking institutions are expected to play a more participative role in identifying gaps in processes, skills and expertise as well as usage of technology.