As a first step, Parliament has been debating: whose control? As control of the rulebook becomes a stronger reality now that we are moving away from the start-position in which we simply imported all the existing rules from the EU, what are the respective roles of Parliament, the government and regulators in this process? A lot has already been said on this by us and others so I will not repeat it here, but I will point out that we are busy preparing ourselves for whatever new role Parliament allocates to us. Indeed Parliament has already decided this for the latest round of Basel rules, and my colleague Vicky Saporta is leading our efforts to re-tool our policy-making function for this new era. We are also getting on with important reforms while that wider debate unfolds, rather than waiting for it to conclude. This is procedurally complex because the position we inherit from the onshoring of EU rules is one in which the location of rules sprawls rather uncomfortably across different levels of legislation and our rulebook. This messiness was necessary to get the onshoring done on time but it makes it complex and time-consuming to update rules – so I hope that we will be able to move to a more coherent structure through time, as proposed by the government in its Future Regulatory Framework consultation. In the meantime, it means that many of our reform efforts involve decisions not just for the PRA but also for government and Parliament.
These have been complemented with initiatives to deepen the bond and equity markets, resulting in a more diversified financial infrastructure. Another priority area has been the development of the Islamic financial system as a viable component of the financial system. With more than two decades experience in developing Islamic finance, Malaysia today has a comprehensive Islamic financial system with all the core components of banking, takaful and the money and capital markets, and supported by a strong legal and supervisory framework. The assets mobilised by the Islamic banking sector have increased significantly to account for about 10% of the total assets of the banking system. In the Islamic capital market, outstanding Islamic bonds amounted to about 45% of the total outstanding bonds. As our domestic financial system develops and strengthens, Malaysia has gradually moved towards a more deregulated and liberalised environment. In the regulation of the banking institutions, a balance will be made between promoting competition and innovation, and maintaining prudence and stability. Regulations will continuously be reviewed to provide greater operational flexibility for banking institutions without compromising prudential objectives. The introduction of the new interest rate framework reflects the move to promote more efficient pricing in the banking system. As progress is achieved in enhancing the capacity and capability of domestic institutions, the financial sector will continue to be gradually liberalised. Moving forward, further deregulation will be undertaken to simplify and liberalise regulations and administrative rules for businesses.