zeti akhtar aziz : the development of the malaysian bond market remarks by dr zeti akhtar aziz, governor of the central bank of malaysia, at the launch of the electronic trading platform by bursa malaysia, kuala lumpur, 29 april 2008. * * * let me first of all thank bursa malaysia for inviting me to say a few words on this occasion of the launch of the electronic trading platform. this initiative marks another important advancement in the development of the malaysian bond market. the electronic trading platform will take over the function that was previously performed by the bond information and dissemination system ( bids ). bank negara established bids ten years ago, in 1997 to provide market information on domestic debt securities. bids was developed as a centralized database that provided information on the terms of the issue, details of trade done and the relevant information on the various debt securities, to facilitate increased transparency and efficiency in the bond market. bids therefore aided the price discovery process thereby promoting secondary and primary activities in the bond market. bids was revolutionary in its time as authorities in other jurisdictions subsequently launched similar initiatives in their respective markets. this electronic trading platform is a significant enhancement to the mechanism in the development of a more vibrant bond market. indeed, this development is timely because the malaysian bond market is now at the threshold of its next stage of development. several factors have brought the development of the bond market to this threshold. firstly, large investment projects of long - term gestation by the private sector can now source financing mainly from the bond market as opposed to only relying on the banking system. as a consequence, the expansion of the private debt securities market has now exceeded the public debt securities market. with the recovery of private investment since 2003 and its increased momentum there has been growing expansion of the bond market. secondly, the liberalisation of the bond market to allow non - residents to raise funds from our domestic bond market has also contributed further to the growth of the market. thirdly, an important development of islamic finance in malaysia is the development of the sukuk market. in 2007, the sukuk issuance has exceeded the issuance of conventional bonds. this has increased the diversity of asset classes and instruments in the malaysian bond market. fourthly, there has been a major structural enhancement in the capital market intermediaries with the introduction of investment banking in 2006. with the permitted foreign interest in investment banking raised to forty - nine percent, foreign participation is encouraged. in addition, islamic banking institutions, including

the industry and we have responded accordingly to some of these issues. i can assure you that we will continue to work with the industry to find solutions to legitimate issues raised by the industry but the industry must act responsibly and with the public ’ s interest in mind. enforcing compliance will continue to be an important focus of the bank. this focus will increase as non - bank institutions such as those in this industry potentially become more vulnerable to financial abuses as a result of strict implementation of anti - money laundering and counter financing of terrorism ( aml / cft ) measures imposed on the banking institutions. the enhanced focus is part of malaysia ’ s effort to counter money laundering and terrorism financing risks. another potential risk is in the exploitation of new products and services made possible with the advancements in technology, where the money services business industry might become a target to channel proceeds from illegal activities. bis central bankers ’ speeches specific regulatory requirements have been introduced, in particular on maintaining proper records and source documents, and the essential requirements to conduct customer identifications and to verify sources and purpose of funds. these steps should reduce these risks. in addition, the bank will continue to conduct on - site visits to your businesses to check compliance, and where necessary, we shall use the enforcement tools provided under the law to enforce compliance. the punitive measures would include the revocation of licences, monetary penalties for non - compliances and prosecution for the more serious offences. we will also continue to act swiftly to stamp out illegal operators and those who assist them in facilitating unauthorised money services business activities. to date, actions have been and are being taken against more than 180 entities, which include the revocation of licence, removal of key responsible persons for serious failures to comply with regulatory requirements, and compounds for non - compliances with various regulatory and operational requirements. several entities have been charged in court and some of these had been convicted. while we will sustain these efforts to continue to raise standards of compliance in the industry, the primary responsibility for ensuring compliance rests with the industry itself. it starts with every company having clear processes, well - trained and informed staff, and effective systems and records that assist in complying with regulatory requirements. the industry has made some progress, and we are encouraged by the efforts that are being made at individual companies and at the industry level. some of you have made more progress than others. for those that continue to wait, time is running out and it is very important that plans be