In 2009, i.e., during the height of the global financial crisis, Bank Negara continued to focus on developing and consolidating a comprehensive set of standards on corporate governance and risk management practices. These standards encompass overarching principles on risk governance with more specific guidance on the management of market, credit, liquidity, operational and insurance risks. Further efforts of Bank Negara include organizing the Financial Industry Conference on risk management. This Conference has encouraged further dialogue on key risk challenges facing the financial institutions and how financial institutions can further enhance their resilience to these challenges. A major milestone was the enactment of the new Central Bank of Malaysia Act 2009. This Act, which came into force on 25 November 2009, has further strengthened the ability of Bank Negara to undertake surveillance and prompt resolution to avert risks to financial stability. The existing Financial Sector Master Plan is currently in the final phase of its implementation. The measures under the Plan, which were undertaken during the past decade, have contributed towards achieving a more efficient, effective, stable and resilient financial sector. This has in turn resulted in more developed financial markets, broader and better product offerings, as well as higher levels of insurance and Takaful penetration. This trend of liberalization is expected to continue, whilst the banking and insurance sectors could possibly see further consolidation, convergence, and competition within the region.

It is crucial to ensure, however, that this does not result in unchecked increases in risk appetite or compromises the quality of risk management practices. What was once a “black swan” event has increasingly become more common due to the high inter-linkages between international economies. As such, we need to be vigilant and ensure all potential risks are addressed and comprehensive risk management measures are adopted, both at the macro and micro levels of the economy. Regulatory reforms in line with risk management Let me turn now to the regulatory reforms in line with the risk management practices. The global financial crisis has exposed weaknesses in the existing international financial architecture and highlighted the fragmentation of regulatory rules across different jurisdictions. It has been a wake-up call for the world to come together to implement regulatory reforms to strengthen the foundations of financial stability and address the issues in the international financial system. For Malaysia, the recent global developments will not alter much the fundamental tenets of Bank Negara Malaysia’s approach to the regulation and supervision of the financial institutions. During the past decade, we have developed and implemented our Risk Based Supervisory Framework and our Risk Based Capital regime. Under these benchmarks, regulatory capital requirements and Bank Negara’s expectations in terms of governance and risk management are already well aligned with the specific risk profiles of individual institutions. The risk assessment and supervision of individual institutions are also further complemented with macro-prudential assessments to monitor the aggregation of risks in the financial system.