The Governing Board of the National Bank decides on the medium-term investment strategy for the monetary reserves. Taking into consideration the criteria of security and liquidity, an appropriate risk/return profile is targeted. In addition to the strategic allocation to the individual currencies and investment categories, the Governing Board defines the permissible range for implementation. Department III implements the strategy. Within the defined bandwidths, an internal investment committee decides on positions which deviate from the strategy. In the risk controlling process, compliance with the strategy guidelines and the operative limits as well as the quality of the debtor categories are monitored. Performance is also measured. With the expansion of the investment spectrum to include issuers with lower credit ratings, risk monitoring is gaining in importance. The Governing Board and the Bank Council’s Risk Committee are regularly informed about the results of the risk controlling process. The Bank Council’s Risk Committee assesses risk control and also oversees adherence to the principles of the investment process. 4. Transparency: a further element of good governance  The National Bank has an accountability and information obligation not only to the bank authorities but also to the public. Since the monetary reserves ultimately constitute national assets, this obligation also applies to the investment policy. The accountability obligation includes regular reporting on our investment activities. The National Bank already provides information on the structure of its assets in its Annual Report, including details on currency allocation, holdings of individual investment categories, and on the major risk and return indicators.

Cumulatively, these factors can undermine consumer confidence and trust in the industry, with important implications for business growth and persistency. Globally, financial institutions need to get serious about addressing the trust deficit in the financial industry. The hallmark of an industry that engenders trust often goes back to the basics of serving its core purpose, and doing it well. This begins with product innovations that should be aimed at increasing the level of public engagement and interest. The industry must abandon the mindset that “insurance is sold not bought”, and design products that people actually need and want to buy. Such products must also be able to afford protection to the underserved segments of society through affordable and simple product solutions. Such products will be easier to sell, lowering distribution costs and contributing to even lower prices in a virtuous circle that delivers benefits to all parties. The industry also needs to explore new cost-efficient delivery channels. The industry has not done well in this respect. As a catalyst, beginning next year, insurers will be required to offer pure protection products through a direct channel without commissions. The high internet and mobile phone penetration in Malaysia suggests that internet or mobile insurance makes good sense. Other untapped channels include banking agents, retail chains, employers and cooperatives. We expect the industry to fully adopt these channels to diversify delivery of services.