house and universal broker industries. this integration is expected to promote a more competitive and dynamic financial system, enhance efficiency and strengthen the potential to capitalise on expanded business opportunities, both locally and abroad, thereby strengthening the competitive position of the new entity. foreign equity participation in investment banks has also been liberalised, from 30 % to 49 %, as part of the overall efforts to strengthen their linkages globally and to enhance the transfer of specialised skills and expertise in the investment banking industry. moving forward, the competitive pressures are expected to intensify in the investment banking industry. with the extension of the investment bank framework to universal brokers, 17 investment banks may emerge from the rationalisation exercise. amid this more competitive and challenging environment, the ability of the investment banks to thrive will no longer depend on factors such as asset and capitalization levels, but on their capacity and capability to manage and utilise their resources in the most efficient and effective manner. of importance is the need for merchant banks to continuously review their comparative advantage, business focus and organisational structure to strengthen their strategic and operational agility to respond proactively to the competition and maintain their market niche. in this regard, investment in human capital and expertise is essential to deliver customised and unique value propositions. with the entry of new players into the industry, it is expected that staff mobility within the industry could increase. the challenge for merchant banks will be to continuously train and retain their pool of expertise. the transformation of merchant banks into investment banks will also bring about new risks as well as a multitude of new opportunities. the placement of banking and capital market activities under one roof entails wider risks which need to be addressed to ensure that they do not pose undue risks to safety and soundness. safeguards and chinese walls are essential to manage conflict of interest situations within the investment banks. as capital market intermediaries, investment banks would also need to carefully manage issues on investor protection and the need to promote fair, efficient and transparent markets. the principles of fair market practice to promote investor confidence and ensure the protection of their interests need to be embodied in investment banking operations. reputation and trust are indeed valued assets and the cornerstone of banking business. as investment banks originate more complex financial solutions to meet the needs of the more discerning and sophisticated wholesale customers, they also need to be mindful of the importance of preserving trust and personal reputation in business practices. in this regard, focus will be accorded to strengthen the overall market conduct

investors and issuers. the expansion of islamic finance and demand for islamic financial assets promise exciting opportunities for innovative and enterprising merchant bankers. such opportunities are available not only in malaysia but also in the region and globally. the time is opportune for tapping into the islamic finance market. malaysia has had a head start in islamic banking and finance. while we have the largest islamic banking market in the world, the largest islamic capital market and largest takaful market, still the potential generated by the unprecedented growth in the global islamic finance industry is yet to be fully harnessed by the players in the malaysian financial sector. as islamic financial products increase in sophistication, a higher level of competencies, skills and structuring abilities of the merchant banking community would be needed. if malaysia could emerge as a supplier of these high - end services, the nature of merchant banking would change significantly. on the part of the government, major initiatives have been taken to create the enabling environment and create resources for the next phase of development of islamic banking and finance. these include our efforts to build shariah expertise, promotion of convergence of shariah understanding, promoting and hosting ifsb, the international islamic standard setting body and more recently work is being undertaken to streamline the regulatory regime for islamic banking and takaful. these cumulative efforts are aimed at promoting a more conducive environment for enhancing malaysia's position as a hub for islamic finance. law reform work on these matters has already begun and is expected to be completed by next year. work is also already underway to establish an international centre for education in islamic finance to produce the professionals and expertise that is vital for the global development of islamic finance. conclusion the year has therefore been marked by significant developments on several fronts. going forward, we need to build on the successes to fully maximise the potential benefits. in this dynamic environment, it is the cumulative efforts of the industry that will allow this hard - earned progress to yield sustainable results. we now stand at the threshold of the development of the financial sector. the merchant banking industry will need to confront the emerging challenges squarely and seize the new opportunities that will emerge with its new intermediation structure. there will also be an important need to stay alert on the emerging domestic and global trends and to be aligned to be well positioned to respond to the new emerging environment and thus sustain the effectiveness of the performance and contribution of the sector to the economy. on that note, let me take