Zamani Abdul Ghan: Creating a competitive banking system - towards the enhancement of quality and efficiency in Malaysian banks Speech by Mr Zamani Abdul Ghan, Deputy Governor of the Central Bank of Malaysia, at the 9th Malaysian Banking Summit 2005 - “Enhancing Competitiveness to Meet Strategic Challenges”, Kuala Lumpur, 10 May 2005. *  *  *  Bismillahirrahmanirrahim Y. Berusaha Encik Mirzan Mahathir, President, the Asian Strategy and Leadership Institute or ASLI Y.Bhg. Dato' Dr. Michael Yeoh, CEO/Director of ASLI Your Excellency Distinguished Guests Ladies and Gentlemen Assalamualaikum warahmatullah and Good Morning On behalf of Bank Negara Malaysia, thank you for the invitation to officiate at this year's Banking Summit organised by ASLI. It is indeed a great pleasure to be here today at this important forum. The theme chosen for this year's Summit is most relevant as it provides an opportunity to deliberate on the challenges ahead and the strategic initiatives needed to realise our common goal of a progressive and competitive banking system that will facilitate and drive our economic transformation. Ladies and Gentlemen, The financial landscape is undergoing transformation, driven by financial liberalisation and consolidation, economic transformation, and more discerning consumers. These developments have been reinforced by technological advancements, which have allowed the developments of new and more efficient delivery and processing channels as well as more innovative products and services. Against this backdrop, a number of challenges have emerged. Foremost amongst these is intensified competitive pressures, spurred by financial liberalisation and technological revolution.

This must surely be considered an ambitious goal. Sizeable imbalances can be seen in the global economy. The massive US current account deficit is eating up a large share of total global saving at present. Managed exchange rates elsewhere, for example in China, delay markets in responding to this problem. Economists claim that a change is inevitable, and the later that it comes, the more upheaval it will cause when it eventually does. As far as Iceland is concerned, however, external conditions have been favourable so far. It enjoys high creditworthiness and wide open access to markets. Interest rates have been low and product prices high, making the strong position of the króna – which will not last forever – much easier than otherwise for many to weather. But we need to make  2  BIS Review 82/2005  sure that favourable external conditions in most areas do not become a fundamental precondition for our own success. In my opinion – after only a few weeks at the Central Bank of Iceland –one of the main reasons that its management is employed there is to pay particular attention to risks in the economy. I shall mention the following illustration. Of course it is perfectly normal for progressive and rapidly growing banks, which feel constrained by the small size of the Icelandic market, to be eager for foreign capital in their efforts to expand and reap profits. The financial system infrastructure and all the criteria assessed by supervisory authorities and ratings agencies are in excellent shape.