purchase by bank of east asia of first pacific bank. this year, development bank of singapore is in the process of acquiring dao heng bank with the intention of eventually combining it with its existing locally incorporated subsidiary. two of the mainland banks, bank of china and icbc, are also consolidating their hong kong operations. the bank of china move is particularly significant since it will create the second largest banking group incorporated in hong kong. what we have not so far seen in hong kong is merger among indigenous banks that are more or less of equal footing. this is perhaps not surprising. such mergers are generally more difficult to arrange than straightforward acquisitions of a smaller bank by a larger bank. in the latter case, the acquirer is in a position to decide what it wants to do as regards management and staff changes, harmonisation of systems and the introduction of new products. with a true merger, these matters have to be settled by consensus, which may not be easy. who for example is going to be the chairman or chief executive? it is probably better to avoid the japanese solution of sharing each of these responsibilities among more than one individual. there is also the question of what is the end - result of the merger in terms of market share. it may be necessary for more than two banks to get together in order to achieve a significant increase in scale. but the more banks that are involved in a merger, the greater the complexity of achieving strategic fit and cultural harmony. the attitude of the hkma this reinforces the general point made earlier that successful execution of m & a is not an easy task. however, despite the potential pitfalls, the hkma continues to believe that consolidation of the local banking sector is desirable and probably inevitable. this is for the reasons i have already mentioned. in general, it is difficult to see how a banking system like hong kong's, which is open to the forces of global competition, can resist the pressures that are leading to consolidation in other banking systems. in terms of hong kong's particular situation, while it is always dangerous to extrapolate current market conditions into the future, it does appear that organic growth is going to be more difficult to achieve than it was in the years before the asian crisis. this lays greater stress on the need for smaller banks to find a strategy that will differentiate themselves from their competitors and enable them to earn an adequate return on capital. this will not be straightforward, particularly since a number of the potential business options

branchless banking and payment system operators and service providers. right now, we are in the final stage of issuing regulations for e - money institutions. sbp is cognizant of the fact that fintechs may find certain regulations as inhibiting for their offering so we are in the process of establishing a regulatory sandbox to identify such issues and find ways of supporting and facilitating innovative ideas. ladies and gentlemen! 13. i am confident that the challenges that i have mentioned earlier will provide great opportunity and space to banks like telenor and companies like ant financials, who have great experience of transforming payments and banking landscape in china thus promoting digitization and financial inclusion. i am hopeful that based on its experience, ant financial will provide out of the box solutions for challenges being faced by the industry and consumers in pakistan. especially i expect that ant financials will bring innovative ideas to pakistan especially to assist sbp in areas like financial inclusion, digitization of payments, e - commerce, sme finance, increasing access points, partnerships with non - bank fintechs and using innovative technologies further to bring efficiency in banking and payments. 14. for my colleagues from banking industry in pakistan, i would like to say that we have to adapt to the changing realities of times. we shall take the challenge and use the opportunities provided by technology to deliver the best of best to our citizens. i expect that the financial sector will take advantage of page 9 of 10 current favorable market environment by investing in innovative technologies and product offerings to expand services and broaden access to financial services in the country. 15. i would once again like to congratulate telenor microfinance bank and ant financial for launching this initiative to facilitate cross border remittances. i am confident that ant financials will play its role in the economic development of pakistan and would further strengthen sino pak ties in the fields of banking, finance and payments. i shall ensure that state bank of pakistan would continue to extend possible support to facilitate them. thank you for your attention! pakistan zindabad. * * * * * page 10 of 10