Asia is seeing the payoffs from the financial reforms, institutional development and the strengthening of the financial infrastructure. While financial markets have become more volatile, financial intermediation has not been interrupted. While our starting point is from a position of strength, we must nevertheless draw upon the lessons from the current crisis. The lessons from the crisis must not be lost. This crisis offers Malaysia and other emerging markets an opportunity to steer the future path of development of the financial sector to a stronger and more sustainable path one which avoids the trappings of greed and reckless behaviour that have significantly set back the financial sector in many advanced economies. It would be foolish of us not to take heed of these lessons and leverage on the opportunity to leap forward on a more solid foundation. Despite these developments, going forward, the trend for liberalization will continue as financial integration in the region will intensify. This will mean greater foreign participation in terms of new institutional presence, strategic alliances and greater participation in our financial markets. Efforts to develop further our foreign exchange market will be intensified. Our financial links will also need to extend beyond the region to facilitate economic links with other emerging economies. On the domestic front, financial services to SMEs need to evolve from transactional and lending-based business to a full-service, relationship-based business.
The household sector, already an important segment being served by the industry, will see further transformation with the continuing evolution of multi-channel distributions with online channels becoming more popular and increased customer demands for product transparency and overall service levels. We expect to see a re-orientation of processes and incentives towards value over volume, further differentiation in the management of customer-relationships and an increasing focus on technology-driven transformations that are more aligned with business strategies. The outgrowth of these strategies will include an accelerated shift in product offerings towards more comprehensive end-to-end financial solutions and further changes in the traditional roles of physical branches and intermediaries, with greater use of more efficient direct channels and strategic alliances to widen the outreach of financial products and services. In the area of e-payments, the creation of a mobile ecosystem is envisaged, to provide an open and inter-operable platform for all financial institutions, mobile network operators and services providers to offer highly automated and cost-effective mobile payment services. Going forward in this new financial system, the role of boards of financial institutions in determining the risk appetite of their institution, in ensuring that strategies are consistent with that appetite and in overseeing risk management systems will become increasingly critical. Shortcomings in how boards discharged their roles in a number of major international financial institutions were a material contributor to the global financial crisis.