growth. while market mechanisms are generally successful in achieving greater productive efficiency, it does not always result in greater allocative efficiency. as a consequence, disequilibrium conditions and market failures may not only be detrimental to social welfare, but may also weigh on an economy ’ s growth and development prospects. strong institutions that provide regulatory and supervisory oversight are therefore necessary, in order to facilitate the effective functioning of markets while having the institutional capability to manage disruptions. the sustainability and continuity of effective policy management depends on the performance of public institutions that have sound policies and governance processes that are formalised in a clear, structured and well - defined framework. equally important is the accountability. in this aspect, the institutionalisation of policies and processes, which culminates in sound governance serves to preserve good practices and imposes the necessary discipline for objective policy making. the gaps in the market infrastructure in the emerging economies however increase the vulnerability of our respective economies to external shocks. such shocks have increased in frequency and magnitude, with the risk of prolonged implications on our economic growth. with its important role in the management of domestic macroeconomic and financial stability, central banks in this changing environment also need to be strengthened in order to enhance its effectiveness in facilitating conditions to support economic development. my remaining remarks this afternoon will focus on institutional building and economic development from the perspective of central banks in emerging economies. in particular, on the role of central banks in supporting the development agenda and as an institution building agent. in most emerging market economies, the mandate of the central bank is generally broader beyond monetary and financial stability to include development of the financial system to ensure effective and efficient functioning of the financial system, financial inclusion to maintain balanced growth and more recently preserving the environment to secure sustainability of our progress and development special role of central banks in emerging economies allow me to focus on the special role of central banks in emerging economies. central banks in most emerging economies are frequently called upon to have a role in the development of the financial system. a well - developed and robust financial system constitutes an essential foundation for sustainable economic growth as it enhances the efficiency of financial bis central bankers ’ speeches intermediation, contributing towards lower transaction costs and increased competitiveness. many central banks have drawn up masterplans and blueprints for this purpose. the key building blocks are the strengthening of financial infrastructure, such as the payments and settlement system, the development of money and bond markets and in the implementation of financial reforms involving the deregulation and greater

the growth in housing loans taken out to buy second and third homes exceeded 15 %. this excludes cash purchases. this in turn drove a higher concentration of new supply in higher priced segments, further widening the demand - supply gap for affordable homes. by 2012, annual house price growth had risen above 11 %, almost four times the 10 - year average house price growth between 2000 and 2009. demand for affordable homes has also increased rapidly from the higher rate of net new household formation. this reflects trends that point to smaller household sizes ; the young moving out from family homes earlier, including to take jobs in urban cities ; and an ageing population preferring to remain in their homes than move in with their adult children. such demand pressures have been further compounded by income levels that have not increased in tandem with the increase in house prices. all told, the shortage in affordable housing based on 2014 data is estimated at 960, 000 units. this could rise to one million units by 2020 if further measures are not taken to increase supply of affordable houses and improve affordability. financing measures implemented by the bank along with fiscal measures by the government between 2010 and 2013 did in fact achieve this to a certain degree. house price growth has 1 / 4 bis central bankers'speeches since moderated to 5. 5 %, closer to income growth, following measures taken to dampen speculative activities in the housing market and manage high household debt levels. lending standards that are more aligned with the level of income have also encouraged private developers to shift their focus to the more affordable segments which should help improve supply conditions. approval rates for housing loans by the banking sector remain high at 74 %, with more than 60 % of the new housing loans extended for house purchases below rm500, 000. loan rejection rates for houses in the affordable segment have actually been on a declining trend, falling by 18 % since 2012. nevertheless, there is also scope for financial institutions to develop innovative financing schemes – such as equity finance – to make home ownership more affordable. these include shared ownership schemes where buyers can acquire partial interest in a home, instead of being burdened by an outright purchase. similarly, we have also observed lease - to - own schemes under islamic finance arrangements, where tenants have the option to increase their stakes in a home after leasing for a period of time. bank negara malaysia continues to work with the industry to uncover new opportunities, including through financial education, to support firsttime home buyers within their means. financing therefore is not the issue