Muhammad bin Ibrahim: Developments in Malaysia’s banking sector Keynote address by Mr Muhammad bin Ibrahim, Deputy Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Official Launch of the Asian Banking School, Kuala Lumpur, 17 August 2015. *  *  *  Thank you for inviting me to deliver my remarks at this official launch of the Asian Banking School (ABS). It is my great pleasure to be a part of this momentous occasion. Today is the culmination of the vision to take professional development and continuous learning in the Malaysian banking sector to new heights. It also marks the beginning of another important and exciting journey in our overall effort to enhance the standards, quality, productivity and competitiveness of the workforce of the financial services industry. It’s an important first step in professionalising the industry. The banking sector in Malaysia has come a long way to grow both in strength and stature, steadily advancing and maturing as it seeks to become more effective and efficient in performing its intermediation function. In the last decade alone, the industry has undergone some fundamental changes following a period of transformation facilitated by the Financial Sector Masterplan (FSMP). Today, our banking system is placed on a solid footing on the back of strong capitalisation, strengthened by improved risk management and governance practices. We are also seeing increased sophistication and a wide spectrum of products and services being offered by diverse players in the marketplace.
To illustrate that, Chart 10 plots the distribution of levels of productivity across countries over a set of sample periods, where productivity is measured relative to a frontier country (the United States) indexed to one. Comparing the distributions in the 1950s and 1970s, there is a clear rightward shift. Cross-country productivity convergence or catch-up was underway, as the Classical growth model would suggest. In recent decades, however, that pattern has changed. Comparing the 1970s with the 1990s, there is a small leftward shift in the probability mass. And in the period since the global financial crisis, there has been a further leftward shift in the distribution and a widening of its range. Today, non-frontier countries are about as far from the technological frontier as they were in the 1950s. Another way of illustrating the same point is by looking at differences in productivity between frontier and periphery countries over time (Chart 11). In the decades immediately following the Second World War, the Classical growth model was operating effectively, with catch-up in productivity underway and at faster rates among emerging market countries with furthest to travel to the frontier. 37 38  Gordon (2014). Barro and Sala-i-Martin (1992) and Rodrik (2011). 9  All speeches are available online at www.bankofengland.co.uk/speeches  9  Since the 1980s, however, that convergence process appears to have stalled, perhaps even to have gone into reverse, in both advanced and emerging economies. The gap to the frontier has failed to close and, in particular for emerging market countries, has widened.