where common functions and capabilities have been pooled leading to more cost - efficient entities as well as allowing for greater focus in the marketing and customer management. following this rationalisation, the cost to income ratio of the domestic banks have improved from 55 % in 2003 to 51 % in the first quarter of this year. on the aspect of improving customer interface and improving time taken to conduct banking transactions, branches have been redesigned with new business models. with this move, branch staff now have greater opportunity to provide value - added consultations and interface with clients. increased investments have also been made to improve information systems - to be better positioned to understand customers'profiles and needs, as well as enhance overall risk management. technologies such as data warehousing are now readily available to aid banking institutions to be more customer - centric and thus be more focused in their approach. as a result, more institutions have undertaken to offer greater product differentiation and value added services. the robust growth in the malaysian economy has also contributed to an increased demand for life insurance coverage. the growth in premium income has continued to outpace economic growth. over the period 2000 - 2004, the market penetration rate increased from 31 % in 2000 to 39 % in 2005. the per capita spending on life insurance products also increased at an average annual rate of 10 % over the same period. notwithstanding this wider reach, life insurance coverage has remained relatively low compared with the more developed markets in the region such as the republic of korea, singapore and japan which reported penetration rates of more than 80 %. given the vast untapped market potential and the increased product innovation and new distribution channels, the life insurance penetration in malaysia is expected to strengthen. demographic changes leading to a growing ageing population has been a growing concern in many countries. given the trends in rising life expectancy and falling birth rates, responding to the increased challenges of retirement financing has been high on the nation's socio - economic development agenda. going forward, there will be greater interest in private pension schemes representing an are of significant growth opportunities for life insurers. the financial performance of the malaysian insurance industry has also continued to be impressive during the 2000 and 2005 despite the challenging underwriting and investment conditions, with growth primarily driven by the life sector. total insurance fund assets of the industry grew at an average annual rate of 13. 8 %. the insurance industry also increased in importance as a component of the economy and financial system. the ratio of total industry assets to nominal gnp rose from

are manifold ranging from efficiency gains brought about by new technologies to the introduction of innovative products and management techniques. further, more advanced research and development facilities and adoption of best practices from more matured financial markets will contribute to the transfer of skills and knowledge, adoption of sound risk management culture, technology and ideas in the domestic financial system. another consideration in the liberalisation process is that of promoting financial inclusion, where all segments of society will have access to adequate financial services. the wide branch network of domestic banking institutions has ensured that non - urban areas have access to banking services, thereby eliminating the use of informal financial services. domestic banking institutions with large presence in the non - urban areas, some as high as 20 % of total branches, have succeeded in achieving sustainable performance while meeting this objective. locally incorporated foreign banks are however located mainly in major cities and serve only certain segments of the banking public. a wider dispersion of branches of locally - incorporated foreign banks across the country would contribute towards achieving greater financial inclusion. for further expansion outside major cities to be a commercially viable proposition, it is recognised that the attainment of critical mass is essential. in this regard, in addition to the flexibility accorded to establish up to four new branches, consideration will be given to allow for greater presence in the non - urban areas and to serve the segments of the economy which are currently underserved. the banking sector is now in a prime position for the next step in evolution. the foundation for the development of a more efficient, effective and stable financial system has been laid. the task is now for the industry to move forward and undertake the necessary actions towards realising goals as envisaged in the fsmp. nevertheless, this journey does not end in 2010. we should also look forward towards what lies beyond 2010. as an open economy, we should also be cognisant with the developments that take place around us. i believe that the malaysian financial services industry is ready to take on this challenge to elevate the performance and standards of the sector. with this, i wish you a productive summit.