high savings rates in the emerging markets – particularly in china – have probably also contributed to the generally low level of interest rates. while 2004 was characterised by a steady and uniform decline in credit risk premiums in the different debtor categories, the past six months saw a less even trend in the credit risk premiums of individual bonds. in the corporate bonds area, the market ’ s attention focused on the two major us automakers. their downgrading to junk bond status sent a small shockwave through the relevant market segments ; other segments have so far remained largely unaffected, however. the credit risk premiums of other corporate debtors rose only slightly and have remained at a historically low level ( cf. graph 2 ). meanwhile, those of emerging markets have developed in line with the economic fundamentals of their respective countries. 2. investment policy a large proportion of the snb ’ s assets comprise currency reserves. an internationally accepted means of payment in crisis situations, they serve as a safety net for the swiss economy and the swiss franc. in order to fulfil this function, these reserves need to be invested in foreign currencies – primarily in the reserve currencies such as the dollar and euro – and in gold. the bank ’ s leeway for investment was extended considerably with the entry into force of the new national bank act in may 2004. this has allowed the snb to invest part of its currency reserves in foreign equities and corporate bonds. in mid - february 2005, the snb – having already invested in corporate bonds since june 2004 – turned its attention to the expansion of its equity portfolios. at present, a little over chf 3 billion are invested in internationally diversified equity portfolios. as the equities are index - managed by external asset managers, the snb takes no active decisions regarding the weighting of individual sectors or securities. in principle, the national bank does not invest in swiss equities and corporate bonds, thus avoiding, from the outset, any potential conflicts of interest which could jeopardise the snb ’ s independence. as a shareholder in swiss companies, the bank would risk being confronted with structural issues. it could also lead to a conflict between its monetary policy and investment policy goals if an interest rate hike by the snb were to erode the domestic companies ’ profits. furthermore, such a move could have an adverse effect on prices should the snb have to liquidate securities of swiss businesses at short notice. and

that have surfaced during the crisis. several changes are also transforming the domestic environment. new domestic sources of growth, the greater role of the private sector in the economy, demographic changes, rising incomes and a growing middle class, and the accelerated pace of urbanisation cumulatively will significantly change the demands on the financial sector. these trends will also be affected by initiatives taken by the government to transform the economy in this next decade into a high value - added, high - income economy, the greater leverage on the advances of technology and the acceleration of the pace of regional financial integration in asia. the malaysian financial system enters this new environment from a position of strength. the successful implementation of the first financial sector masterplan in this recent decade has produced a financial system that is well positioned to respond to the new imperatives of the decade before us. our financial institutions are well capitalised with strong buffers and improved risk management and governance practices. significant efficiency gains have also bis central bankers ’ speeches reduced intermediation costs in an environment of greater competition. this is largely arising from the cumulative efforts to building strong institutions, the development of the financial infrastructure, and the strengthening of the regulatory and supervisory framework. this decade has also seen the enactment of wide ranging legislation that has given greater certainty and predictability in the financial system. this includes the central bank of malaysia act 2009 and the financial services act expected to be tabled in parliament in 2012 has strengthened the legal framework for the financial sector. it will also enhance the bank ’ s capacity to manage risks from financial intermediation activities that occur outside the banking system and provide enhanced powers for timely intervention actions. the enhanced intermediation during this decade has benefitted access to financing, particularly for small and medium enterprises, has also improved, both in volume and efficiency. by leveraging on the distribution networks of commercial banks, enhanced product and risk management capabilities, access to financing by this sector has increased at an annual rate of almost 20 % since 2005. the financial infrastructure in malaysia has also been significantly strengthened. malaysia has an effective financial safety net that includes a comprehensive deposit insurance system and institutional arrangements that provide avenues for advisory, redress and rehabilitation. innovations in payment systems and instruments as well as infrastructure for the issuance, trading and settlement of debt securities and the access improved market information has contributed to greater efficiency and has also enhanced the overall price discovery process. to support our liberalisation measures our payment infrastructure has also been enhanced to support cross - border trade settlements in local