These regulations will focus on enhancing Bank Negara Malaysia's overall oversight on banking institutions, whilst according greater flexibility for the Boards and management of the banking institutions to chart business strategies within the parameters set by the regulations. Ladies and Gentlemen, In an environment where group structures are becoming more complex, prudential regulation and surveillance over diversified financial conglomerates will be further strengthened. In this regard, Bank Negara Malaysia will finalise the Framework for Consolidated Supervision of Financial Conglomerates in 2005. The first Concept Paper that was issued in December 2003 has received positive feedback from the industry. On the group structure, there has been wide acceptance of the proposal for all financial groups to be headed by financial holding companies. The essence of having the financial holding company is to allow banking institutions within the financial group to rely on the holding company as a source of financial strength. Flexibility will, however, be given for commercial banks to remain at the apex of the financial groups. Nevertheless, safeguards will be introduced to ensure that the commercial banks exhibit higher standards of risk management practices and oversight to manage the higher risks arising from such structures. A further issue is the scope and nature of activities that would be permissible within the financial holding company structure. The principle for defining financial activities or activities that are incidental to financial activities will be clearly outlined to facilitate any likely restructuring that will be required as a result of the new policy.

Ladies and Gentlemen, The adoption of a principle-based regulatory approach will provide banking institutions with greater flexibility in deciding on strategic options in a more competitive environment. As the banking industry grows at an accelerating pace, there are common areas where collective efforts by the industry will not only bring benefits to the financial sector but also to the overall economy. In this regard, there is an increasing trend among developed countries such as the United Kingdom, Canada, and Australia, where the bankers associations have an important role in spearheading initiatives to promote high standards of ethical code of market conduct to meet consumers' rising expectations and demands. The bankers associations have increasingly assumed the role as a focal point for consultation with not only the regulatory authorities, but also by the other stakeholders on policies affecting the financial sector. In this respect, such associations have played an important complementary role to the regulatory authorities' efforts in promoting a more progressive, dynamic and resilient banking system. In addition, banking associations in these countries have also acted as the voice for the industry in articulating the position of their members to promote the interests of the industry. In Malaysia, there are several areas of common interest to the industry which the associations can spearhead. It is, therefore, to the benefit of the industry to reassess the role of the associations with respect to taking forward common initiatives and interests of the industry.