several European countries). Social health insurance schemes based on earnings contributions is a means by which such funding sources can become a complementary source of funding to public sector. Such an institutional arrangement should provide high quality basic healthcare for the population whilst private health insurance can have a complementary role in providing higher level care for those that have the means to absorb these costs. In developing a financial sector that will deliver innovative financing for economic transformation throughout the different phases of development requires several supporting elements. These include: a. Having strong financial institutions that are resilient to withstand the economic cycle;  b. Establishment of a credit information system;  c.  Development of a domestic bond market for financing large investments for both the public and private sectors. This includes the necessary infrastructure to facilitate the functioning of the bond market;  d.  Having the talent pool in the financial services industry;  e.  Financial literacy has to be advanced aggressively;  f.  Effective structure to ensure sufficient supervisory oversight to ensure soundness and stability of the financial system;  BIS central bankers’ speeches  3  g.  Mechanism for resolution of debt problems including for public and private sector;  h.  Potential to leverage on technology. This in particular enhances distribution channel and outreach;  i. Consumer protection framework needs to be in place; and  j.  Surveillance mechanism needs to be in place.

Ladies and gentlemen, The growing evolution and demand for online financial services will lead to greater digitisation of banking services. While the use of cash and cheques will continue to be important, more consumers are realising the convenience and flexibility of electronic banking in meeting their daily payment needs. The change in consumer behaviour is reflected in the increasing use of electronic payment systems in the country. The volume of cheques processed through the cheque clearing centres has shown a declining trend in terms of both volume and value. This has been reinforced by the introduction of the interbank Giro and Internet banking three years ago. The number of interbank Giro payments has more than quadrupled in 2002, while electronic funds transfer and bill payments conducted through Internet banking has been on an increasing trend. More customers are likely to be drawn to Internet banking, which is gaining acceptance in Malaysia with now over 1 million subscribers. Increases have also been recorded in the number and value of ATM transactions and card payments. Ladies and gentlemen, While the pace of the transition from paper-based payment instruments and systems to electronic instruments is increasing, the adoption of electronic payment solutions needs to be accelerated. Consumers and businesses have to become familiar with using the new payment methods and their advantages. The SMEs, in particular, should take advantage of electronic delivery systems to improve their access to banking services and finance. This would be an initial step toward venturing into e-commerce as a means to penetrate new markets.