Zeti Akhtar Aziz: Strengthening the banking sector for further competition Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the dialogue session with banking institutions, Kuala Lumpur, 17 February 2005. *  *  *  Bismillahirrahmanirahim Distinguished Guests, Ladies and Gentlemen, Economic transformation, a more competitive environment, advances in technology, strengthening international linkages, and more discerning customers will be the important forces that will drive changes in the domestic financial landscape in the years ahead. Economic transformation can be expected to be more pronounced as efforts intensify to shift resources to new areas of growth. A more competitive environment will emerge from increased deregulation and further liberalisation. Advances in technology will continue to increase the potential for creating new instruments, new business processes and enhance the ability to measure and manage risks. Strengthening international linkages will come as foreign presence and participation in the domestic financial system increases and as initiatives are taken by domestic groups to operate beyond domestic borders. Against this background, more demanding customers with higher expectations will see greater consumer activism exerting their influence on the financial landscape. These developments will indeed present a dynamic environment with new challenges for the banking industry. Ladies and Gentlemen, It is my pleasure to welcome you to the dialogue session between Bank Negara Malaysia and banking industry.

Ladies and Gentlemen, Moving forward, consumer and SME financing will continue to be two important areas of growth. The overall macroeconomic and interest rate environment would continue to be supportive of growth in these two sectors. The challenge for banking institutions is to ensure that consumers and the businesses have access to a wide range of products, while at the same time ensuring that the necessary infrastructure is in place to manage risks arising from these businesses. This is to ensure that lending to these sectors would be sustainable and avoid the risks that have recently been experienced in a number of other countries in this region. While focusing on consumer and SME financing, banking institutions should also recognise the emergence of a number of new growth sectors in the economy, including activities in the services sector, and the agriculture and agro-based industries. These areas represent opportunities that can be capitalised upon by the banking institutions. While these may be viewed as non-traditional areas, banking institutions that introduce new lending models and products to cater to the financial requirements of these areas would have the early advantage in capitalising the potential of these new markets. In this regard, the main theme of this year's dialogue, is "Tapping Opportunities in the New Growth Areas - Fostering Best Lending Practices", for discussion by the banking community. We are very pleased to have four distinguished speakers to share with us their expertise and experiences in building successful and sustainable portfolios in consumer lending, SME financing, microcredit and agriculture financing.