Financial Sector Blueprint focuses on 9 areas of improvement

KUALA LUMPUR: The Financial Sector Blueprint will focus on achieving nine areas of improvement, taking into account expected changes in the global and domestic economies and demands on the financial system in the coming decade.

The nine areas include the effective intermediation for a high value-added and high income economy; development of deep and dynamic financial markets; greater shared prosperity through financial inclusion; strengthening regional and international financial integration; internationalisation of Islamic finance; safeguarding the stability of the financial system; achieving greater economic efficiency through electronic payments; empowered consumers and talent development for the financial sector.

Launched yesterday and set for implementation through to 2020, the blueprint has now a strengthened banking sector with increased linkages between various sub-sectors in the financial system to leverage off.

Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said the blueprint, themed “Strengthening Our Future”, builds on and reinforces the solid foundations that had been achieved in the past decade via the first Financial Sector Masterplan.

“Malaysia has benefited from a well-developed, more competitive and well-regulated financial system (which has) emerged from the global financial crisis strong and resilient,” she said, noting that the domestic economy had been continuously supported through difficult times.

Under this blueprint, the financial system is envisaged to offer a diverse range of financial products that cater to Malaysians across all social, geographical and economic status as well as businesses through 69 recommendations.

It will be reinforced by deep, liquid and efficient foreign exchange and money markets to complement the bond market and be more well-engaged regionally and internationally.

“A strong focus in the blueprint is on developing the financial ecosystem to enhance funding for innovation which represents a key transformative agenda in our new economic model,” Zeti said, referring to the Economic Transformation Programme.

“A national consumer credit law and improved arrangements for combating financial crime are also included in the recommendations,” she said, adding that another important agenda was “the migration from paper-based payment to electronic-payments to generate significant economic efficiencies from more expedient, secure and cost-effective means of moving funds”.

With the blueprint, the financial system is expected to expand from the current 4.3 times to six times of gross domestic product (GDP) by 2020. The financial sector contribution to nominal GDP is projected to rise from 8.6% to between 10% and 12% in the same period.

More than half of total financing will continue to increase in prominence, growing at a faster pace to account for 40% of total financing.

Zeti also noted that emerging economies were projected to account for 60% of total world output from the current 40%, even though they would continue to be affected by global developments.

The preceding masterplan, implemented from 2001 to 2011 bolstered an annual growth of 7.3% in the local financial sector.

“The bond market, comprising conventional and sukuk markets, has tripled in size, providing businesses with alternative access to financing solutions including multicurrency to meet a diverse range of risk and maturity preferences,” Zeti said, adding that the establishment of the regulatory and supervisory framework in Islamic finance have positioned the country at the frontier.

“Malaysia has an effective financial safety net that includes a comprehensive deposit insurance system and institutional arrangements that provide avenues for advisory, redress and rehabilitation,” Zeti said of the improvements.