Wide-ranging strategies have included consolidation, reengineering of business processes and reassessment of business models to fit the new financial landscape. Leveraging on advancements in information and communication technology is important to improve business automation and efficiency levels. To achieve a higher level of operational efficiency, rationalisation of business networks and outsourcing are gaining greater significance. The journey is however never-ending, to adapt to the changing needs of the market, and at the same time, taking into account all the potential risks. The need to enhance the capacity at the firm level is not limited to improving the way business is conducted and the level of efficiency in doing business. The financial institution, as a service provider, relies heavily on human intellectual capital which contributes to the innovativeness and competitiveness of the institution. Thus, human capital has been constantly sharpened through continuous development programmes and challenged to maximise its full potential. Towards this end, Bank Negara Malaysia has established the International Centre for Leadership in Finance to provide an avenue for the development of industry leaders especially in this region. In the wake of the growth in the volume and complexity of financial transactions, and worldwide integration of financial markets, risk management has increasingly become a key concern. Sound risk management practices will minimise adverse consequences faced by financial institutions during periods of uncertainty. Effective risk management systems facilitate the measurement and management of risk exposures, thus minimising potential future losses.

Efforts were directed to promote a robust domestic bond market to provide a competitive source of long-term debt funding and viable investment alternatives for investors. The trading and information infrastructure was enhanced with the introduction of the Fully Automated System for Tendering, Bond Information and Dissemination System and real-time gross settlement system. The regular issuance of MGS with various maturities along the active benchmark yield curve has facilitated the evolution of a benchmark yield curve. The introduction of new instruments such as asset-backed securities and MGS futures were facilitated, and liquidity in the market was improved by enlarging the size of MGS issues and widening the institutional investor base. The introduction of the Principal Dealer (PD) system promoted an active market-making mechanism for both Government and selected securities in the bond market. In terms of magnitude, the bond market (including both public and private sector bonds), tripled in size from 44.7% of GDP in 1996 to 80.6% of GDP as at end-June 2003. The private debt securities market accounted for 54% of bonds outstanding and 43.6% of GDP as at end-June 2003 compared to 13.5% of GDP in 1996. Funds raised by the private sector through the bond market increased to 16% of the total private sector debt financing (as at end-June 2003) from 9.3% in 1996. 4  BIS Review 40/2003  Another development in our financial landscape is the growing significance of Islamic banking and finance in the financial system.