have happened to monetary policy prior to central bank independence. alternatively and in a third model, these powers could be given to an independent regulatory body. this model is likely to ensure that prudential regulation is both dynamic and time - consistent. an expert regulator would be able to identify and implement necessary dynamic adjustments, and, for reputation reasons, it would have an incentive to maintain prudential standards provided that it avoided industry capture. but, absent further accountability mechanisms to enhance it, it would lack legitimacy. in summary, each of these models lacks one of the ideal features for the institutional structure of prudential regulation. i would like to thank matthew willison, hugh burns, nicolo fraccaroli and david swallow for their assistance in preparing these remarks the fourth model is an independent regulatory body with a clear mandate set out in primary legislation and a clear set of accountability mechanisms to parliament. this model combines the benefits of an expert regulator that can adjust prudential regulation dynamically, with an objective that incentivises it to maintain prudential standards, while using the mandate and the accountability mechanisms to ensure legitimacy. table 1 summarises the degree to which these four models possess the three ideal features of an institutional structure of prudential regulation. in theory at least, this fourth model is preferable because, unlike the other models, it possesses all three of the ideal features. table 1 : comparison of alternative models of the institutional structure of prudential regulation model dynamic? time - consistent? legitimate? primary legislation x √ √ government √ x √ regulator √ √ x regulator + clear mandate √ √ √ + accountability mechanisms to parliament there are plenty of precedents for this institutional structure of prudential regulation, including in the uk. the financial services and markets act 2000, better known as fsma, established a regulator in the form of the fsa and specified the regulator ’ s objectives and responsibilities. the detailed regulatory rules, however, were set out by the fsa in its handbook, not written into the act. following the financial crisis, the model for prudential regulation in the uk has been further developed by the establishment of the financial policy committee ( fpc ) and the prudential regulation authority ( pra ). the mandates for both the fpc and pra are set out in primary legislation : the fpc is responsible for protecting and enhancing the overall stability of the uk financial system ; and the pra ’ s primary objectives are to promote the safety

jessica chew cheng lian : distribution in a liberalised environment keynote address by ms jessica chew cheng lian, assistant governor of the central bank of malaysia ( bank negara malaysia ), at the general insurance agents convention “ distribution in a liberalised environment ”, kuala lumpur, 5 august 2016. * * * the profound impact of financial technology on the provision of financial services – including insurance – is set to gain more traction in malaysia. just last week, bank negara malaysia issued a discussion paper which outlines the conditions for companies to test financial technology ( also known as “ fintech ” ) innovations in a safe environment. this responds to the innovations that we have seen emerge in the financial services industry ; many of them tapping into opportunities now made possible by technology to enhance the customer experience, improve risk management and lower the costs of providing financial services. the insurance industry itself has just entered the first phase in the progressive liberalization of the motor and fire insurance tariffs which began on 1 july this year. after over 30 years during which more than 60 % of the general insurance market has been regulated under tariffs, this is arguably the most significant reform of the general insurance market in decades. the implications of the reform are much wider than just an adjustment to premium levels. it will pave the way for a new wave of product innovation, significantly expanding choices for consumers. it will improve incentives for safe driving behaviours and better risk management practices by both risk owners and insurers. and it will address market distortions which have threatened access to motor insurance, particularly for higher risks. this is also a time when businesses and households are facing rising costs and more uncertain conditions which can adversely affect discretionary spending on insurance. at the same time, the exposures of households and businesses which insurance is designed to protect, have actually increased as evidenced by more frequent and severe incidents of natural and man - made disasters. all of these developments raise critical questions for insurance agents. one question that comes up time and again is : will insurance agents continue to be relevant? if you are in this room today, then i assume you will agree with me that the answer is clearly ‘ yes ’. but i believe you are also here because there is a recognition that agents will have to evolve. even if some of you were not completely convinced of this before, that reality surely can no longer be ignored or dismissed. so the more important question then is how agents can be a meaningful part of this change in order to advance the important