This micro transformation involves three elements: first, solving locally-nominated and defined problems; second, employing nudges or smart incentives to induce desired behavior; and third, experimenting on specific markets, groups or products before a broad roll-out. I must admit that these are hardly unfamiliar concepts in business. Yet few businesses have gone further to integrate these elements within broader transformation strategies. This has increasingly been the approach taken by the Bank, in facilitating initiatives such as the FinTech innovations in the financial sector. The Regulatory Sandbox introduced last year allows for the experimentation of potentially beneficial FinTech innovations that may seem inherently risky at inception, but properly harnessed could be a game changer. By providing a “safe” or “contained” space for testing, the risk effects can be comfortably observed, controlled and calibrated. Wider applications of this approach by institutions will go a long way to cultivate a balanced banking culture of innovation and resilience. Such applications are also not confined to the area of technology. It can span across a bank’s decision to enter a new market, reform incentive structures, disrupt outdated internal processes and provoke changes in management paradigms. The possibilities are limited only by our attitude to change, our ability to adapt, and our willingness to pursue creative solutions within acceptable risk limits. Banks that will remain relevant in the future are those that have a deep understanding of the shifts in the economy and the consumer.

The last two primary auctions of government bonds recorded a healthy bid-to-cover ratio of more than two times. Following higher market demand, MGS benchmark yields have eased lower between 8 – 32 bps across the yield curve. Non-resident holdings of government papers have also been pared down from a peak of 34.7% to 25.3% as at end April 2017. More importantly, our surveillance indicates that the composition of stable and long-term investors is now much higher, with previous outflows mainly due to short-term speculative positions exiting the market. This is definitely a positive development. Malaysia remains a highly open economy and will continue to welcome the participation of longterm investors. Indeed, we remain a highly attractive destination for foreign direct investment. Returns on Malaysia’s FDI assets have averaged 12.9% per annum between 2010 to 2016, higher than nominal GDP growth of 7.7% over the same period3. Payoffs from investing in the real economy are one of the highest in the region, making Malaysia an important profit centre for investors. 4/6  BIS central bankers' speeches  In the next seven months, the Bank will introduce further regulatory measures to strengthen the foundations for a strong and resilient banking system. First, we will implement a mandatory employment reference check for financial industry employees which is aimed at removing employee information asymmetries during job transitions. Second, we will share with the industry proposed revisions to the outsourcing policy to improve the governance and supervision of financial institutions, especially involving crossborder arrangements.