There should be industry-wide participation in the e-payment infrastructure to attain critical mass in a much faster time frame and drive the unit cost of production lower. Accessibility of payment services should be made more convenient by leveraging on existing network infrastructure, such as facilitating inter-bank funds transfers via the ATMs. Further, industry standards on common payment value dates, payment references and notifications would entice consumers to use the more reliable e-payment channel. To encourage the use of e-payments, consumers should also be provided with the right pricing incentives. In this regard, banking institutions should price their payment services according to their production costs to encourage the use of the more cost effective and efficient payment modes. Ladies and Gentlemen, The Malaysian economy has registered a robust growth of 7.1% in 2004, the fastest growth since 2000. The economic prospects for 2005 will continue to be favourable as the economy enters the year from a position of strength. Growth is expected to be sustained at 5-6% as underlying conditions in the domestic economy remain strong, with robust private consumption and investment activities. The sustained global growth as well as relatively favourable prices for primary commodities would ensure that the external environment would remain supportive of growth. The banking sector also enjoyed a very good year in 2004, a year in which strong performance was recorded, and this positive trend has continued into the first quarter of 2005.

In addition, with enhanced risk management capabilities, banking institutions will be better equipped to price products and services more competitively while ensuring that their risk exposures remained within manageable levels. Better insights into their risk profile also facilitate in their formulation of business strategies and enable the optimal use of their capital. In this context, banking institutions must be prepared to beef up their financial strength and capital level during the current favorable economic environment so that they could weather vulnerability during downturns and crisis situations. 4  BIS Review 32/2005  Ladies and Gentlemen, While the responsibility for strengthening competitiveness rest with the banking institutions, Bank Negara Malaysia plays an important role in spearheading the development of the banking sector. In realising the vision of a progressive and dynamic banking system, Bank Negara's policy initiatives aim at providing a more conducive environment that encourages innovation and competition, while maintaining the safety and soundness of our banking sector. In line with this, Bank Negara Malaysia will ensure its prudential framework is adaptable to changing market circumstances and business practices, and does not contain features that might inhibit banking institutions from upgrading their capabilities or delaying their response to changes. Our regulatory approach has shifted away from prescribing detailed rules towards "principle-based" regulations. There is now greater focus on providing "incentive compatible" parameters that encourage banking institutions to conduct their businesses prudently, whilst allowing them the flexibility to develop strategies within the broad principles.