zeti akhtar aziz : economic ties between china and malaysia address by dr zeti akhtar aziz, governor of the central bank of malaysia, at the launch of industrial and commercial bank of china ( malaysia ) berhad, kuala lumpur, 28 april 2010. * * * it gives me great pleasure to be here today on the official launch of industrial and commercial bank of china ( malaysia ) berhad ( icbc ). the establishment of icbc in malaysia, the largest commercial bank in the world today, represents an important development in forging stronger economic and financial ties between the people ’ s republic of china and malaysia. this licence is issued pursuant to the arrangement entered into between the government of malaysia and the people ’ s republic of china in 2009, reinforcing a long - term relationship that has been strengthened over the years. the presence of icbc, in our financial system will pave the way for increased business and investment opportunities between our two countries. as asia leads the global recovery and with the progressive liberalisation in the region, the economic integration of the asian region can be expected to strengthen further. today, intraregional trade in asia has increased to an average of 50 % of the total exports of the region as compared to 32 % in 1995. the underlying structural and demographic changes in asia are expected to reinforce this trend. in addition, as domestic demand in the regional economies increases, it will provide further impetus to intra - regional trade and to the overall prospects for asia. in the area of infrastructure development in asia, the overall investment requirements for the next ten years are estimated to be about usd8 trillion. to support these developments, the regional financial integration process in asia needs to be accelerated and deepened. significant progress has already been achieved in strengthening cooperation and collaboration efforts amongst regional policymakers within the asian region to ensure that financial stability in the region is preserved. efforts have also been taken to develop the financial markets in asia. in addition, after a decade of financial reforms, the financial systems in asia have emerged resilient. while the financial systems in several of the advanced economies continue to be confronted by unresolved challenges, financial systems in the region have continued to function and perform well to support private sector economic activity. financial institutions in asia, have in fact, continued to expand their reach within the region during this period to support and facilitate the regional financial and economic integration. as regional financial integration accelerates moving forward, this would contribute towards sustaining the future

. one set of studies and recommendations takes the perspective of individual firms and offers steps that firms can implement themselves to enhance risk management. the working group ’ s otc study highlights ways in which collective efforts could enhance risk management. 1. collective action to strengthen market infrastructure today ’ s otc infrastructure remains decentralized ; trades are executed and settled bilaterally. a review of that infrastructure reveals weaknesses or limitations in existing practices. some of these weaknesses can be, and are being, addressed by individual firms. other weaknesses require cooperation and collective action by firms. for example, firms could reduce risk and increase efficiency as they improve their individual back office procedures. risk could also be reduced through centralized mechanisms to execute and settle trades. regulatory, legal, and operational barriers currently prevent some of these mechanisms from being used. many of the recommendations in the working group ’ s report on otc derivatives would remove unnecessary legal and regulatory barriers to such innovations. a challenge that policymakers always face in such times is to let markets evolve naturally and to refrain from attempting to dictate changes. the recommendations in the working group ’ s report reflect this evolutionary philosophy. my goal today is to review areas in which improvements are possible and to highlight the role that public policymakers can play. 2. trading status quo. the status quo for the trading of otc derivatives is a system of telephones and voice brokers. it is a bit incongruous that the financial instruments employing the most sophisticated asset - pricing technology are traded, by and large, by means of the lowest technology. most otc derivative transactions are executed by telephone between the traders acting for the two counterparties. conversations are almost invariably recorded, and these recordings are used as evidence of the existence and terms of a trade if disputes arise. traders are responsible for ensuring that prospective deals fall within credit lines for the counterparty and within overall trading limits. firms have widely varying means for ensuring compliance with credit limits. some firms have on - line systems through which traders can check the availability of credit lines. in other firms, the process is manual, and traders apply to a relationship officer before executing a trade. voice brokers are used in some transactions, most frequently for common and relatively standardized transactions. brokers frequently are used for single - currency interest rate swaps and forward rate agreements. as in the spot foreign exchange markets, brokers are used to locate counterparties for these trades. they do not act as principal. once counterparties who are willing to