While the gaps in operational efficiency and productivity have improved, there remains great scope for further improvement particularly in areas where the domestic banks are evidently behind the foreign banks. For instance, productivity standards of the counter personnel as measured by the number of counter transactions per counter employee for the domestic banks averaged approximately 5,000 compared with 11,000 for the foreign banks. Meanwhile, the number of domestic banks that did not experience any disruption in their retail deposit and loan initiation systems is significantly lower than that of the foreign banks. In terms of the time taken to approve new credit card applications it averaged 8 days for the domestic banks compared with 6 days for the foreign banks. As can be seen from the scorecard, the consolidation programme for the domestic banking sector was a necessary pre-requisite to enhance the sector’s capacity to compete. Size alone however, is not a sufficient condition that will result in producing efficient and competitive banks and it does not offer guarantee of success. Being a large bank is however, an important enabler to achieving enough scale to be able to invest in cutting-edge technology and management systems and to attracting the talent required to compete with the best players in the market. Domestic institutions need to be able to meet the range of products offered by foreign competitors. But the larger scale and wider range of activities will demand stronger management teams.
This Summit indeed provides an opportunity for bankers and the private sector to discuss the issues facing the banking industry. It is now just over a year since the release of the Financial Sector Masterplan. It is therefore also a good time to undertake stock taking. Today, I would like to take the opportunity to discuss the progress that has been achieved over the recent year. I would also like to discuss some of the critical issues in the strategies that are being adopted by the banking institutions in charting their strategic course to enhance capacity and capability to achieve improved effectiveness and competitiveness. During the period of slower economic growth in 2001, following the global downturn in the technology sector, the banking sector clearly demonstrated its resilience and underlying strength. During this period, domestic sources of growth was important in sustaining the economy. Access to financing in this environment was therefore particularly important. The strengthened position of the banking sector in terms of quality of portfolio, capitalisation and profitability enabled them to continue to perform their intermediation function without disruption. The banking sector generally remained profitable and financially sound during this period. At the end of this first quarter, the risk weighted capital ratio was sustained at 12.5%. Profitability of the banking industry had also continued for the third consecutive year since the Asian crisis.