Zeti Akhtar Aziz: Towards world-class banking - efficient, effective and resilient banking system Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Malaysian Banking Summit 2004, Kuala Lumpur, 14 May 2004. *  *  *  Bismillahirrahmanirrahim The turn of the century has seen a significant transformation of our banking sector. The changes have been driven by the new emerging economic opportunities, changing customer requirements, new technology, the more competitive environment and changes in the regulatory and supervisory framework. This period has also seen significant progress achieved in the strengthening of the domestic banking system. The strengthening of the banking sector has been driven by the restructuring, re-engineering, rationalisation and consolidation that has been undertaken during this period. Indeed, this progress has been achieved against a background of a challenging global financial and economic environment. As we strive for high performance benchmarked against international standards, we must not lose sight of the context of the financial and economic environment in which we operate. Central to this is a common vision of developing a world class banking system that is best able to serve the nation and thus contribute to economic growth in an environment of financial stability. The expectations are thus for the banking system to be able to provide the intermediation function that is effective, efficient, resilient, and that supports sustainable economic growth. Ladies and Gentlemen, It is indeed my pleasure to be invited again to this year’s Malaysian Banking Summit.

In terms of the development of the financial infrastructure, efforts were intensified towards evolving a more diversified financial infrastructure to facilitate the economic transformation into a more diversified economic structure. This has involved the development of a more diversified financial structure anchored by a more efficient and resilient banking system, to support economic transformation and growth. The strategies to achieve this vision are outlined in the Financial Sector Masterplan launched in March 2001. BIS Review 28/2004  1  Three years into the Financial Sector Masterplan, positive results have been achieved on several fronts. •  The capacity of the banking sector now has strengthened with the level of capitalisation at its strongest, reflected by the risk-weighted capital ratio of the banking system that has been consistently maintained at above 13%. This has enhanced the resilience of the banking sector and is reflected in the ability of the banking system to weather a number of adverse external developments in the recent period, without any destabilising and disruptive consequences. •  Following the consolidation exercise in 2002, the banking system today is characterised by larger and better-capitalised domestic banking institutions operating within larger banking groups, benefiting from economies of scale to provide a wider range of products and services to cross sell, and therefore widen the reach nationwide. •  Domestic banking institutions have also embraced a higher level of technology and improved business processes. •  There have been marked improvements in the level of efficiency.