The new approach amplifies the focus on institution-specific risks in the supervisory assessment and rating process. Importantly, the framework serves to mutually enhance understanding by the institutions and the Central Bank of the inherent risks faced by the respective institutions, and thereby establish the common expectations regarding the management and control of those risks, taking into account the nature, scope, complexity and risk profile of the institution. This process, in turn, facilitates appropriate supervisory and institutional responses that are proportionate to the risk assessments of individual institutions and their systemic impact. Similarly, the implementation of the risk-based capital framework for insurers will further reinforce the regulatory focus on risk. The adjustments to this framework will take into account the feedback received from the industry on the concept paper released by Bank Negara Malaysia in December last year, as well as the results of the impact study that was concurrently carried out to assess the potential capital adjustments required by insurers. Specifically, the adjustments to the framework are being made to achieve greater consistency between the valuation bases for assets and liabilities, and to fine-tune the asset risk charges. A second consultation paper, incorporating these changes, will be released for further industry comments later this year. Insurers will no doubt welcome the greater degree of investment flexibility that will be allowed under the risk-based capital framework. It is an important improvement over the current "admitted assets" framework, and one that is also expected to significantly raise the profile of the investment management function within the industry.
Zeti Akhtar Aziz: Moving towards a more competitive market Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the 2005 dialogue session with insurers and takaful operators, Kuala Lumpur, 9 August 2005. *  *  *  The annual Dialogue between Bank Negara Malaysia with insurers and takaful operators is held to discuss issues confronting the insurance and takaful industries, major policy initiatives by Bank Negara Malaysia as well as current economic and financial developments affecting the industry. This year's dialogue is being held on 9 and 10 August and attended by the Chairmen, members of the Board and Chief Executive Officers of insurers, takaful operators and bank holding companies. Themed "Moving Towards a More Competitive Market", the dialogue this year will provide a platform for insurers and takaful operators to discuss strategic issues relating to the challenges of the more competitive and rapidly changing financial landscape. The keynote address delivered by the Governor, Bank Negara Malaysia at the opening of the Dialogue session is attached. The Malaysian economic and financial landscape continues to be dramatically transformed. As this transition process gains momentum, the key issues confronting the insurance and takaful industries today are: defining effective growth strategies in an increasingly borderless world; sustaining confidence in the face of increased demands for greater transparency; responding to the challenges of regulatory and accounting changes; and managing risk in an increasingly complex and volatile environment.