As investment banks originate more complex financial solutions to meet the needs of the more discerning and sophisticated wholesale customers, they also need to be mindful of the importance of preserving trust and personal reputation in business practices. In this regard, focus will be accorded to strengthen the overall market conduct of investment banks, as any lapses in market conduct can have widespread implications on their reputation. The emphasis will be on promoting greater market discipline to drive the performance of investment banks. Disclosurebased initiatives will be continued to ensure that consumers and investors have access to appropriate information to allow them to make well-informed investment decisions. The changes in the merchant banking landscape will also bring a host of new opportunities. In this regard, offshoring represents an important avenue for merchant banks to diversify their business potential and income stream. The strengthened capacity of merchant banks arising from the transformation process will open new lucrative business opportunities, especially abroad. Merchant banks would need to capitalise on these opportunities to strengthen their presence beyond the domestic borders, particularly in areas where they have the niche and capabilities to compete with their counterparts abroad. Cross-border deals are no longer the exception but the norm. This is especially so with the liberalisation of the foreign exchange administration rules which provides broader opportunities for corporations to invest abroad. A greater degree of awareness of global developments and adoption of international best practices will thus enhance the capacity and capabilities of merchant banks to excel in their ventures abroad.

Such opportunities are available not only in Malaysia but also in the region and globally. The time is opportune for tapping into the Islamic finance market. Malaysia has had a head start in Islamic banking and finance. While we have the largest Islamic banking market in the world, the largest Islamic capital market and largest takaful market, still the potential generated by the unprecedented growth in the global Islamic finance industry is yet to be fully harnessed by the players in the Malaysian financial sector. As Islamic financial products increase in sophistication, a higher level of competencies, skills and structuring abilities of the merchant banking community would be needed. If Malaysia could emerge as a supplier of these high-end services, the nature of merchant banking would change significantly. On the part of the Government, major initiatives have been taken to create the enabling environment and create resources for the next phase of development of Islamic banking and finance. These include  BIS Review 83/2005  3  our efforts to build Shariah expertise, promotion of convergence of Shariah understanding, promoting and hosting IFSB, the international Islamic standard setting body and more recently work is being undertaken to streamline the regulatory regime for Islamic banking and Takaful. These cumulative efforts are aimed at promoting a more conducive environment for enhancing Malaysia's position as a hub for Islamic finance. Law reform work on these matters has already begun and is expected to be completed by next year.