zeti akhtar aziz : enhancing corporate governance practices in the malaysian financial sector keynote address by dr zeti akhtar aziz, governor of the central bank of malaysia, at the official launch of the financial institutions ’ directors education ( fide ) forum, sasana kijang, bank negara malaysia, kuala lumpur, 12 june 2012. * * * it is my great pleasure to be here this morning at the launch of the financial institutions ’ directors education ( fide ) forum. the establishment of this forum, an initiative by the founding directors of the fide program will contribute to further the efforts to enhance corporate governance practices in the malaysian financial sector. many of you have made invaluable contributions to the conception and development of the fide program and its ongoing refinement. the program is not only unique and highly effective, but it is delivering palpable change and contributing to higher standards of corporate governance in our financial industry. this in turn is supporting stronger, and more resilient financial institutions. following the recent global financial crisis, corporate governance practices in the financial industry have come under significant scrutiny. there has been increased pressure on the management, boards of financial institutions and on regulators to significantly improve the governance practices in the financial industry notably on the incentive systems, accountability and controls. the problems that led to the build - up to this however, are not new. issues around misaligned incentives and an over - emphasis on short term performance which encouraged reckless risk - taking, in addition to the lack of transparency, and the pervasive conflict of interests have long been the focus of public attention especially in relation to companies with dispersed shareholding structures. these same issues however, are far more serious when they involve the financial institutions given the significant externalities inflicted on society following the failure of such financial institutions. banks in particular are especially vulnerable to the consequences of governance failures given the critical importance of public confidence to their very survival. since the crisis, substantial work on several fronts have been devoted to strengthening the resilience of financial institutions. new capital and liquidity standards have been a key focus of the global regulatory reforms and the work to transpose these global standards into national regulations are now well underway in many countries, including in malaysia. while this will deliver significantly improved frameworks for risk - taking by financial institutions, they remain, at best, poor substitutes for good governance. evidence of this can be drawn from the contrast between institutions that operated under the same regulatory framework, but that experienced very

’ t stop at borders, we have furthermore decided to cooperate with the bank of japan to explore the potential future use of dlt for central banking services in a more global context. second, how could a central bank interface and interoperate with dlt - based settlement services which are not necessarily offered by the central bank itself? for example, it needs to be assessed whether “ a central bank could inject and control the amount of central bank money circulating in a dlt environment ”. or whether, for example, a private sector trustee 4 / 5 bis central bankers'speeches could ensure that the values circulated in a dlt - based solution are fully backed by a corresponding amount of central bank money held " off - chain ”. such concepts could alter the existing central bank role as operator and impact monetary policy implementation. therefore, joint analysis by the eurosystem will be required. we are on a journey which could radically alter the financial ecosystem as we know it. the ecb is committed to be part of this journey. thank you. 5 / 5 bis central bankers'speeches