LIAM has been an advocate of important issues that concerned the industry and has served as the primary interface between the industry and the Government, the Bank, and other key stakeholders. In this capacity, one of its key 2  BIS central bankers’ speeches  roles is shaping public opinion by providing accurate information on the industry. It is also an important agent of change for the better of the entire industry – not just in the short term or with a bias towards any particular stakeholder group. Not too long ago, a media publication reported that life insurance agents are being marginalized and the majority of them earn very low commissions due to restrictive remuneration structures. What the report failed to highlight however, was that such agents were mostly part-timers generating only one policy per month. The report also does not discuss many structural issues confronting the industry; the fact that demand for life insurance in Malaysia remains much lower than in our more developed Asian neighbours. Or that Malaysia’s per capita spending on life insurance of USD330 is lower than the world average of USD373, or seven to 12 times lower than the amount spent in Singapore, Japan and Hong Kong. Also lost was the fact that, the world is experiencing demographic, lifestyle and environmental changes that have profound implications for mortality and morbidity rates. Life threatening diseases that were benign 40 years ago are common causes of early death today due to less healthy lifestyles and greater mobility of labour.
At the HKMA, we have just introduced an initiative called “Balanced and Responsive Supervision”. It involves a mechanism to regularly review with banks possible execution issues arising from the supervisory processes, as well as to collect ideas for streamlining supervisory practices and requirements. Through better and ongoing communication with the industry, we should be able to achieve a more optimal and sustainable supervisory outcome in the longer run. 14. I would also argue that banking supervision is not the only, and should not become the most important, means in protecting the interests of bank customers. It is my strong belief that regulation and supervision are most effective in prescribing what constitutes unacceptable behaviours or outcomes, e.g. minimum standards for capital and liquidity ratios, prohibition of unacceptable market behaviours such as insider dealing and rigging of interest rate or FX benchmarks, no mis-selling of financial products, etc. However, supervision is much less effective or appropriate in setting good corporate culture, values and ethical standards of a financial firm. No amount of external supervision or policing can instill and sustain the right culture and ethics of a bank. Culture and ethical standards must be from top-down, owned by the Board and filter down to the senior management and then to all levels of the firm. A bank and its staff must internalise good culture and values in such a way that they behave properly not because they are afraid of being caught and punished by the supervisors but because they think it is unethical to do otherwise. 15.