Muhammad bin Ibrahim: Future banking: reimagining banks – driving transformation and innovation Keynote address by Mr Muhammad bin Ibrahim, Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the ASLI (Asian Strategy & Leadership Institute) 20th Malaysian Banking Summit, Kuala Lumpur, 26 May 2016. *  *  *  It is my pleasure to be here at ASLI’s 20th Malaysian Banking Summit. The theme “Future Banking: Reimagining Banks – Driving Transformation and Innovation” is especially relevant in light of the significant changes taking place in the banking industry and wider economy. The new world ahead The financial crisis may have struck almost a decade ago, but has left in its wake a profoundly transformed landscape. With global economic growth remaining slow and uneven, it is increasingly clear that this is no mere downturn in the business cycle, but a realignment of the world economic order. Structural reforms continue to take place in many advanced and emerging economies albeit at varying pace across countries. Such reforms are critical as this will contribute towards enhancing future growth prospects. In an environment of weak growth, authorities face considerable challenges in managing the immediate effects of some of the reforms. The limits of monetary policy under unorthodox and unprecedented policies continue to be tested in a number of economies, with outcomes that still remain debatable. Broader forces of change are also underway. Of significance is the accelerated pace of technological change, driven by increased processing power and connectivity.

This was attributable to a number of external and domestic shocks affecting the economy since late 2014. The major policy reforms such as the implementation of the GST also saw households and businesses adjusting their spending. As we move forward, these shocks will gradually dissipate and growth of the Malaysian economy will improve. Further support is also forthcoming in the  BIS central bankers’ speeches  1  form of Government measures to increase disposable income; thus, facilitating households and firms’ on-going adjustments. The assessment is therefore for the economy to grow by 4 to 4.5% for 2016. Importantly, our financial system remains resilient and supportive of the economy. It is important to recognise the underlying reasons for the resilience of the Malaysia economy. This resiliency has been as a result of the continued strength of our fundamentals and the successful reforms and structural adjustments we have undertaken over the last decade. Three changes to the economy have been particularly instrumental. Firstly, the structure of the economy has become more diversified and over-reliance on any particular industry has been mitigated. Secondly, growth has also become more balanced, driven by continued private sector activities with imbalances and excesses kept in check through keys measures implemented by the Government and Bank over several years. This has been complemented by crucial fiscal reforms that, while having short-term costs and being very unpopular, ultimately put the economy on a more sustainable growth path. Third, is the continued strength of our external position.