Business

Saturday July 25, 2009

Liberalisation to remain key theme

By ELAINE ANG


PETALING JAYA: Liberalisation will continue to be a key theme for the domestic banking sector upon the completion of the Financial Sector Masterplan (FSMP) in 2010, industry players said.

The Association of Banks in Malaysia executive director Chuah Mei Lin said given the recent global economic challenges, the buzzwords for the Malaysian financial sector going forward would be “continued resilience” and “intelligent competition”.

“We can certainly look forward to new measures being introduced during and after the completion of the current FSMP, be it in a structured and comprehensive package with clear time frames and milestones and in the same mould of the current FSMP or in a loose scheme of measures to address gaps or expand on completed plans,” she added.

Chuah noted that while the intensity of domestic competition was enhanced in line with the theme of the current FSMP, the best domestic institutions must be permitted to flourish on local shores and overseas. Thus, the next FSMP, if any, must be careful not to stifle competition in the name of overzealous regulation and supervision, she said.

HSBC Bank Malaysia Bhd deputy chairman and chief executive officer Irene M. Dorner expects further liberalisation in the financial sector to enhance Malaysia’s position as a regional centre for Islamic banking.

“The future direction will be towards maintaining Malaysia’s competitive edge in Islamic banking as a regional hub, which means that the sector needs to continue to be innovative and liberalised by allowing more regional players into the country.

“It may be that Islamic banking regional offices will be based in Malaysia to manage the Asean region,” she said.

Dorner said the current FSMP has made local banks stronger in terms of capital and liquidity and has also enhanced their ability to compete with foreign banks.

“Upon the completion of the FSMP, we should see a level playing field emerging which will allow each bank to leverage on its competitive advantage in different niches to excel,” she said.

RAM Rating Services Bhd financial institutions ratings head Promod Dass expects any new financial sector master plans or regulatory strategies to accentuate the progress of the Islamic banking and insurance segments.

Liberalisation would also continue to be a key theme.

“Given the aftermath of the global financial crisis and our observation in other markets, we could expect regulations and regulatory oversight to be enhanced – this could bolster safeguards for investors, depositors, and the Malaysian market,” he added.

Alliance Bank Malaysia Bhd group chief executive officer Datuk Bridget Lai expects Bank Negara to continue to develop and/or enhance the framework to reflect a more consolidated market-oriented supervision with international recognition without compromising prudential oversight or good risk management.

“These measures will include adequacy of capital and relaxed lending-related guides as well as the promotion of an efficient market mechanism and alternative financial service provisions to customers and financing for growth industries,” she said.

However, Chuah of Association of Banks in Malaysia pointed out that balancing greater corporate governance and robust risk management practices against the cost of doing business and competitive edge would continue to be a challenge.

“One of the questions for the next FSMP may be how much emphasis on oversight supervision is necessary without the risk of the financial system losing the semblance of liberalisation,” she said.

“Another area of focus for regulations would be consumer protection,” she said.

A banking analyst with a local stockbroking firm envisages the need for more de-regulation efforts in tandem with the intense competition in the industry.

“In addition to the recent measures announced to liberalise the financial services sector, we think that more can be done to raise foreign ownership limits for commercial banks. We note that there is no threshold on foreign equity participation in Singapore, Indonesia and Thailand,” she said.

“For example, foreign banks with international reach may concentrate on trade financing while local banks with large networks will be better placed to service the small-and-medium enterprise market,

  • E-mail this story
  • Print this story