Defaults increase when, as now, the deterioration in activity weakens the financial position of bank customers, particularly in the case of households whose members lose their job. Thus, following a long economic boom that brought doubtful assets ratios to historically low levels, the year 2008 saw a sharp rise in such ratios, and the persistence of difficulties in the real sector of our economy suggests that pressures have not yet dissipated. This is a risk that banks must be mindful of and manage appropriately. The diminished pace of activity and the increase in bad debts, which are general trends across Spanish banks and savings banks, exerted pressure on their income statements already in 2008. The recurring income inherent in a traditional banking model, which is therefore less reliant on financial market developments, explains why, despite the difficult economic circumstances, bank results were positive, in clear contrast to those reported by many of the institutions in other developed countries’ banking systems. But Spanish banks’ results will come under considerable pressure in the future. In the short term, as a result of the foreseeable increase in bad debts. In the medium term, because competition for funds will squeeze operating margins and this pressure will not be readily offset as it was in the past by the generation of higher volumes of business. And I do not believe that the ongoing deleveraging of the financial sector, and of the economy in general, taking place both in Spain and globally, should be viewed as transitory.
Migration path, five years after In 2011 Bank Negara Malaysia had developed a comprehensive roadmap in its Financial Sector Blueprint to drive the migration to e-payments with measurable targets to be achieved by 2020. Over the last 5 years, Bank Negara has worked with the payments industry to put in place conducive regulatory frameworks, agree on market incentive structures and build enhancements to e-payment infrastructure and services. Our aim is to provide an enabling environment for individuals and businesses to migrate away from paper based payment methods and adopt e-payments instruments. The results have been encouraging. Since the implementation of the Pricing Reform Framework in May 2013 and the e-Payment Incentive Fund (ePIF) Framework in January 2015, cheques which had only declined at a marginal rate of 2% on average from 2011 to 2013, had declined at a higher rate of 10% in 2014. The decline in cheque usage had accelerated to 16% for the first 9 months of this year. Consequently, the number of cheques cleared is projected to fall from about 207 million in 2010 to 149 million by the end of 2015. If such decline rate is sustained, the target of reducing cheques to 100 million per year by 2020 would be achieved. The reduction of about 100 million cheques above saves a minimum of RM300m not taking into account other savings in terms of efficiency and security. Similar trend was observed in the number of electronic fund transfer transactions.