In March this year, the new framework for investment banking was unveiled, paving the way for the further rationalisation of domestic capital market intermediaries. As you may recall, the objectives of the framework are twofold: to facilitate internal rationalisation of the merchant bank, stockbroking company and discount house within the same financial group; and to promote the rationalisation of the discount house and universal broker industries. This integration is expected to promote a more competitive and dynamic financial system, enhance efficiency and strengthen the potential to capitalise on expanded business opportunities, both locally and abroad, thereby strengthening the competitive position of the new entity. Foreign equity participation in investment banks has also been liberalised, from 30% to 49%, as part of the overall efforts to strengthen their linkages globally and to enhance the transfer of specialised skills and expertise in the investment banking industry. Moving forward, the competitive pressures are expected to intensify in the investment banking industry. With the extension of the investment bank framework to universal brokers, 17 investment banks may emerge from the rationalisation exercise. Amid this more competitive and challenging environment, the ability of the investment banks to thrive will no longer depend on factors such as asset and capitalization levels, but on their capacity and capability to manage and utilise their resources in the most efficient and effective manner.
Work is also already underway to establish an international centre for education in Islamic finance to produce the professionals and expertise that is vital for the global development of Islamic finance. Conclusion The year has therefore been marked by significant developments on several fronts. Going forward, we need to build on the successes to fully maximise the potential benefits. In this dynamic environment, it is the cumulative efforts of the industry that will allow this hard-earned progress to yield sustainable results. We now stand at the threshold of the development of the financial sector. The merchant banking industry will need to confront the emerging challenges squarely and seize the new opportunities that will emerge with its new intermediation structure. There will also be an important need to stay alert on the emerging domestic and global trends and to be aligned to be well positioned to respond to the new emerging environment and thus sustain the effectiveness of the performance and contribution of the sector to the economy. On that note, let me take this opportunity to wish you all a very happy new year, and a productive and successful year ahead. 4  BIS Review 83/2005