Deregulation and liberalisation are the future of the Malaysian banking and finance industry, said Bank Negara governor Dr Zeti Aktar Aziz.

Touching on various issues relating to Malaysia's steady economic growth at the 10th Malaysian Banking, Finance, and Insurance Summit in Kuala Lumpur yesterday, Zeti also said the regulatory framework needs to be both flexible and sound.

"The cost and benefits of regulations are carefully weighed to ensure a well-balanced regulatory framework that meets prudential objectives yet remaining relevant and adaptable to the changing environment."

"For the regulatory framework to foster efficiency and competition, it has to be balanced with the objective of attaining soundness and preserving the stability of the financial system through the promotion of sound risk management," she asserted.

The central bank chief also said that self-regulation would improve the banking system both internally (through regulation) and external (through foreign direct investments).

"Moving forward, as market discipline improves and both banking institutions and insurance companies are better positioned to undergo self regulation, further deregulation can be expected."

"The emphasis is on self regulation, where stronger corporate governance, integrity and transparency are critical for banking institutions to achieve investor confidence and public trust."

The social factor

Zeti also focused on the social factor as one of the forces of liberalisation, namely customer-centric service and human intellect capital.

"Greater attention on excellence in customer service requires continuous investment in staff development, which will be a vital part of the process."

"It is vital to continuously invest in human intellectual capital so as to create a pool of talent, skill and expertise that will drive the performance of the financial system."

This is to complement Zeti's aspiration to provide high value-added product and services that could work top-down as well as bottom-up.

"Skilled individuals are needed to be able to deliver high value-added products and services, adopt advanced business practices and have the necessary competence to build confidence in the financial market and trust of the consumer."

She also said that the banks should play a role in promoting financial inclusion that is to make banking service accessible to those in non-urban areas.

"A wider dispersion of branches of locally incorporated foreign banks across the country would contribute towards achieving greater financial inclusion."

Thus in line with the Ninth Malaysian Plan, this financial inclusion move would result in balanced growth as well as closing the gap between the urban and the non-urban areas.

"Promotion of financial inclusion where all segments of society should have access to adequate financial services is vital because we want to experience balanced growth," she added.

The two-day summit was attended by the captains of the Malaysian banking and financial industry and senior government officials from the related ministries.