This addresses a key lesson from global financial crisis – that greater attention needs to be directed at identifying and managing systemic risks that arise from interactions between financial institutions and markets, and their collective impact on the broader financial system. As interlinkages within and beyond the Malaysian financial system deepen, the sources of potential vulnerabilities and shocks can be amplified, with larger and more complex institutions posing greater risks to system-wide stability. Bank Negara Malaysia’s prudential standards and the intensity of our supervision will be more differentiated going forward to reflect these risks. In recent months, we have issued two standards on operational risk and compliance. These standards reflect the differentiation by setting higher expectations for larger and systemically important financial institutions. Bank Negara is also assessing options to ensure that systemically important institutions have adequate capital buffers; that their capital is proportionate to the risks posed to the broader financial system and the possible costs of failure. In addition, we are progressing work in coordination with PIDM to develop an effective resolution and recovery framework. Banks are expected to continuously assess and identify critical functions from a systemic perspective within their operations, and prepare contingency and recovery plans to preserve those functions under a stress scenario. Bank Negara will engage the banking industry to share more information on this initiative, including our implementation approach. A concept paper on this will also be issued for comments. Raising the bar on governance Finally, we will continue to raise the bar on governance.

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.