As a result of the realignment, the Bank is better positioned to conduct effective surveillance of the financial system; to address regulatory overlaps and duplication within the system; to deal more strategically with the weight of multiple objectives and range of issues confronting the financial system, and more importantly, to preserve regulatory neutrality in the management of similar risks between different financial service providers. Ladies and gentlemen, These emerging trends in the international and regional environment will have an important bearing on the changing climate shaping the banking sector. While it brings new opportunities, it will also bring challenges. Let me return to the theme of this summit – the continued reinvention and transformation that needs to be considered for the industry going forward. I would like to focus on three main areas. The first concerns human capital development. This is vitally important for the future development and growth of the financial sector. Going forward into the future this will become the pivotal factor determining the capacity to reinvent and transform. Financial institutions have two broad options. One would be to “buy talent”. This remains a viable option as long as productivity growth remains aligned with wage increases. Banks, however, need to be wary of bidding up wages without commensurate efficiency improvements or increases in value-add. This would not be sustainable and given the prevailing competitive market conditions, such a strategy will eventually erode the banks' competitiveness resulting from the additional costs. The other option is to “build talent”.

In looking at the future terrain of the financial sector in Malaysia, six trends are particularly important – first, the changing configuration of the global economy and global financial markets; second, regional economic and financial integration; third, financial sector development amidst increased liberalisation in the Asian region; fourth, increased role of domestic demand in the Asian economies; fifth, growing significance of Islamic finance in the international financial system; and finally, developments in the regulatory structures and approaches. It can be expected that all these trends will have a significant bearing on the future of the banking industry. First, the global economic configuration has been altered by the emergence of several large emerging economies into the global economy. This is especially evident in Asia, where the  BIS Review 83/2007  1  rise of China , India and the South East Asian economies have increased Asia's global role. As a result, Asia today features four 1 of the world's twelve largest economies and several of the fastest-growing economies. Collectively as a region, Asia contributes about 40% of global output 2 and one-fourth of world trade. The region is also a significant net exporter of capital, holding two-thirds of the world's foreign exchange reserves and is the largest holder of the developed economies' sovereign bonds. One-quarter of Fortune's top 500 global companies are Asian corporations. This opens up tremendous business opportunities for Malaysia as a part of this dynamic growth region.