CHALLENGES FOR THE HUNGARIAN BANKS As I said right at the outset, it is now time to look ahead and begin to address some major issues for the Hungarian banks - issues which, thanks to the progress made over the past few years, are no longer totally dissimilar from those facing banks in western Europe. I intend to make a few comments on these, since they are issues on which I can possibly throw some light on the basis of my own professional experience. 1. The first is about the specificity of banking, i.e. about the possibility or desirability of clearly distinguishing banks, through rules and regulations, from other financial intermediaries. I noted that the recent changes in Hungarian banking law have implied a movement towards the de-specialisation of banks, notably in the field of securities transactions. I believe that a development towards the universal banking model is justified - on certain conditions. It is justified for two groups of reasons. First, because financial innovation in general, and securitisation in particular, are breaking down the traditionally neat distinction between banks and other financial intermediaries, indeed even between financial intermediation and financial markets, all over the world. Some time ago, banks were defined as financial intermediaries whose liabilities (mainly sight and short-term deposits) were equivalent to the money supply, and the money supply was defined as the total sum of bank liabilities.
We are already seeing, for example, an expansion of partnership models with non-traditional intermediaries such as e-commerce and e-hailing platforms, which has enabled the offering of 'sachet insurance' or bite-sized insurance covers to consumers at 'point-of-sale'. I am intrigued at how consumer wearables with glucose monitoring technology are being used as data points to overcome traditional pricing barriers for specialised medical cover to diabetic patients. There can be no mistake – innovation is occurring across multiple dimensions, spanning beyond the product level towards the whole business operations, even birthing entirely new digital-only institutions. At our end, Bank Negara Malaysia is doing our part to ensure a progressive and dynamic market – one that is welcoming of these novel business models and new entrants. The Digital Insurance and Takaful Operator Framework Discussion Paper published earlier this year emphasises inclusion alongside competition and efficiency as  2/6  BIS - Central bankers' speeches  value propositions that we look for in assessing prospective applicants. As we work towards issuing the Exposure Draft by the midyear point, I encourage applicants who can demonstrate strong capabilities in these three areas and meaningfully close critical protection gaps in Malaysia to come forward to be part of the journey. Beyond new entrants, we also envision data sharing platforms to be a key enabler in making critical protection solutions affordable, through better cost control management and price transparency. Highlighted in our recently launched Financial Sector Blueprint, the cost of private medical care in Malaysia is among the highest in Southeast Asia.