zeti akhtar aziz : reflections on financial reform – malaysia ’ s experience speech by dr zeti akhtar aziz, governor of the central bank of malaysia ( bank negara malaysia ), at the 2013 china business news ( cbn ) annual meeting and finance summit “ reflections on financial reform – malaysia ’ s experience ”, beijing, 8 december 2013. * * * it is my honour and pleasure to be invited to speak at this 2013 china business news finance summit. as the globalisation of finance intensifies, the world is becoming increasingly more inter - connected and integrated. this has largely been due to the trend towards increased financial liberalisation by most parts of the world. it has been maintained that such deregulation and liberalisation would facilitate the development of more efficient and robust financial systems and that it would result in a more efficient allocation of financial resources across borders. while such financial liberalisation may indeed bring such wide ranging benefits, it also brings with it increased risks that needs to be effectively managed. it was for these reasons that malaysia adopted a conscious effort to put in place the financial and economic pre - conditions so as to enable us to benefit from such financial reforms involving the deregulation and liberalisation of our financial system. allow me to share our experience in pursuing this agenda. following the asian financial crisis, malaysia embarked on strategies for an orderly development of the financial sector. focus was first placed on strengthening the institutional capacity of the domestic financial intermediaries so as to narrow the performance gap between the domestic and international financial intermediaries. in parallel with this was the intense effort to develop the domestic bond market. during this phase of the development of the financial system, significant advancement in the banking sector was made in terms of capitalisation, risk management and governance practices, delivery channels and in human capital development in the industry. this paved the way for the interest rate reform to move to greater market orientation, thereby supporting a more efficient pricing of financial products and services. the more competitive environment that it generated also became an important driver of productivity gains, customer centricity and innovation in the financial system. equally important, was the attention that was given to the development of a deep and vibrant domestic bond market as an alternative channel for the efficient raising of funds, particularly by the corporate sector. the development of the bond market has enabled better matching of long - term projects with long - term funds, and by reducing the over - reliance on the banking system, it has contributed significantly to financial

respect of the public. earning this right is difficult, but once this is accomplished “ a central bank would have the strongest guarantee for its independence and effectiveness, far stronger than any formal expression of central banking authority ”. yet, however independent a central bank is from the government, it cannot function in isolation. fiscal and monetary policies are most effective when they are well coordinated. further, in a world increasingly buffeted by protectionism and the risk of financial contagion, central banks 2 / 3 bis central bankers'speeches must cooperate with each other. effective policy making today needs to have a global perspective as the fallout of policy failures often spread rapidly across borders. cooperation at the national, regional and international levels, is necessary. this trust however, forms out of reliability, and reliability stems from competence. it is my firmest belief that the best way for us to honour the late governor ismail ali is to carry on this vision – the vision of a central bank independent, competent and respected. once again, i would like to thank everyone present for joining us in commemorating the centennial of governor ismail ali ’ s birth. in particular, our heartfelt gratitude goes to prime minister, tun dr siti hasmah and family members of governor ismail ali for your support and presence for today ’ s special occasion. i invite distinguished guests, ladies and gentlemen to explore the gallery exhibition to honour the life and achievements of this great man, governor ismail ali, our first malaysian central bank governor. 3 / 3 bis central bankers'speeches