Zeti Akhtar Aziz: The Malaysian banking industry reinvention and transformation Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the 11th Malaysian Banking Summit "The Malaysian Banking Industry Reinvention and Transformation", Kuala Lumpur, 19 July 2007. *  *  *  In this recent decade, the Malaysian banking sector has been significantly transformed and reinvented. The restructuring, consolidation and rationalisation efforts that were undertaken in the banking sector have placed the financial sector on a stronger foundation. This decade has also been a period of favourable performance and increased resilience. This has been achieved with the successful integration of business processes and the redeployment of resources to support new areas of growth. Financial reforms have also changed the environment. Progressive deregulation and liberalization have increased the flexibility to financial institutions, while also resulting in new business opportunities and increased competition. These developments have also further strengthened the incentives for improved performance. Significant structural changes during this period have also reshaped the landscape. The introduction of capital market intermediaries, investment banks, an increasing presence of new international players in Islamic finance, and a significantly more developed bond market, has resulted in a significantly more diversified financial system. The resulting payoffs for the financial system, and the economy generally, have clearly been positive. Today, the financial sector has evolved from being an enabler of growth to become an important source of growth in its own right.

The first years of our democracy were marked by economic difficulties, partly resulting from the international crises linked to sharp oil price increases and the lack of an anchor for inflation expectations in most developed countries. Nevertheless, this new Spain, democratic and integrated into Europe, never stopped looking outwards. Trade and financial flows and the movement of capital increased, and exports and imports rose from accounting for roughly 35% of GDP in 1986 to 66% in 2017. These steps towards modernisation would never have been possible without a society that was convinced of the fact that Europe represented prosperity and the future. The pro-European nature of civil society united Spaniards more strongly than their ideologies or political affiliations, and this sentiment has held firm despite the difficulties people experienced during the financial crisis. A recent survey by the Elcano Royal Institute shows that eight out of ten Spaniards believe that opening up markets provides Spanish businesses with good opportunities2. This is resounding proof that Spain benefits from the European Union in general, and the Economic and Monetary Union created by the euro area in particular. The annual growth in per capita income between 1977 and 1985, one year before Spain joined the EU, was 0.7%, well below the 1.8% enjoyed by the countries that would go on to form the euro area. However, between 1986 and 1998, before the euro was introduced, Spain’s per capita income grew at an extraordinary annual rate of 2.7%, above the average for future euro area countries of 2.1%.