The failure of a systematically important financial institution may also result in serious ramifications and costs to the economy, given their roles and inter-linkages within a country’s economy. For this reason, especially in the conduct its business operations, financial institutions are subjected to a higher standard of integrity and professionalism. In recognition of this, statutory responsibility is entrusted to the board and senior management to steer the institution and to safeguard its safety, integrity and reputation at all times. As public interest entities, actions by financial institutions have far reaching implications for a wide range of stakeholders. Modernising corporate governance for the banking sector and the insurance industry has been a major focus for Bank Negara Malaysia following the Asian financial crisis in 1997. In the years since then, various regulatory reforms have been implemented to strengthen board practices, roles and responsibilities. These reforms include requiring the establishment of board committees, enhancing the independence of the board, expanding transparency and raising disclosure requirements. We also commissioned a study on board remuneration with the aim to improve board remuneration packages and as a way to retain and attract fresh board talent. At the international level, more expanded efforts were undertaken to strengthen corporate governance in the financial sector in 2008 following the global financial crisis. It became evident that ineffective boards and weak senior management oversight had been key contributing factors to the failure of some of the largest global financial institutions.

In most emerging market economies, the mandate of the Central Bank is generally broader beyond monetary and financial stability to include development of the financial system to ensure effective and efficient functioning of the financial system, financial inclusion to maintain balanced growth and more recently preserving the environment to secure sustainability of our progress and development Special role of Central Banks in emerging economies Allow me to focus on the special role of Central Banks in emerging economies. Central Banks in most emerging economies are frequently called upon to have a role in the development of the financial system. A well-developed and robust financial system constitutes an essential foundation for sustainable economic growth as it enhances the efficiency of financial  2  BIS central bankers’ speeches  intermediation, contributing towards lower transaction costs and increased competitiveness. Many Central Banks have drawn up masterplans and blueprints for this purpose. The key building blocks are the strengthening of financial infrastructure, such as the payments and settlement system, the development of money and bond markets and in the implementation of financial reforms involving the deregulation and greater market orientation and liberalisation resulting in greater integration with the global financial system. Central Banks in many emerging economies are also tasked with promoting financial inclusion. Greater financial inclusion is a key component for an economy towards achieving a more balanced growth and thereby increasing the prospect for a more sustainable growth. What are the factors that have allowed Central Banks in the emerging economies to perform these roles?