Muhammad bin Ibrahim: Building trust in the insurance industry Speech by Mr Muhammad bin Ibrahim, Deputy Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Malaysian Insurance & Takaful Industry Distinguished Partner Awards Dinner 2015 “Building Trust in the Insurance Industry”, Kuala Lumpur, 23 October 2015. *  *  *  It brings me great pleasure to be here tonight at the inaugural Malaysian Insurance and Takaful Industry Distinguished Partner Awards Dinner. Since the Central Bank assumed regulatory role of the industry 27 years ago, the insurance and takaful landscape has transformed significantly. The insurance and takaful penetration rate, measured by the number of policies per population, has increased four-fold from 11% in 1988 to 56% today, and the total paid-up capital of direct insurers has grown twelve-fold from RM635 million to RM8 billion over the same period. Today, the industry has emerged much stronger than when we first started the journey together in 1988. We should take pride in our historical track record the various changes that we had made, the difficult but satisfying journey that we embarked on to realise the full potential of the industry. It is indeed a transformational change that enable the industry to be in the strong position they are now. But at the same time we should not believe that the same thinking and strategy that drove yesterday’s solutions will be as effective tomorrow.
With an average daily turnover exceeding USD22 billion and over 90 participating banks (including 18 that have a significant presence in Thailand), our USD RTGS system in Hong Kong provides ample USD liquidity and easily accessible correspondent banking service to Thai banks for the PvP service. This should help them develop a wider range of banking services and financial products in Thailand. At our end, banks in Hong Kong will find new correspondent banking opportunities through serving Thai banks in settling their USD FX transactions in Hong Kong. I am sure this new relationship will create opportunities for commercial cooperation on other fronts. BIS central bankers’ speeches  1  6. Third, the link will also help banks comply with supervisory requirements relating to the management of FX risk in a cost-effective manner. In February 2013, the Basel Committee on Banking Supervision issued an updated guidance on management of FX risk, which recommends that banks should reduce principal risk as much as practicable by settling FX transactions through the use of financial market infrastructure that provides PvP settlement. This recommended best practice is being implemented by bank supervisors on a global basis. The decision of BOT to implement the PvP link will certainly facilitate banks and the payment and settlement systems in Thailand to meet these recommended standards in good time. 7. While these are all good reasons to introduce the PvP link, its success will depend on the commitment and dedication of all parties concerned.