The Rt Hon Sir Edward George: The Bank of England’s monetary policy objective and recent challenges Speech by The Rt Hon Sir Edward George, Governor of the Bank of England, to the Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA) Birmingham, 11 April 2002. *  *  *  I've had a long-time interest in the RSA. I was honoured to be elected as a fellow in 1986. But this is the first time I've participated in one of your programmes. The Society, unusually, brings together people from different backgrounds and disciplines - across the arts to the sciences, but with a common interest in social and economic progress in the broadest sense. That diversity, but also commonality, of interest is reflected in the RSA Journal, which I find a fascinating read - whenever I get the time. It's reflected, too, in your lecture program so that I find myself slotted in between a lecture entitled "The feel good factor", on a medical theme, and another entitled "Chaos is good for you!" describing a creative approach to business management! In fact I have been invited to talk about the "Monetary Challenges" we are currently facing - and, when you've heard what I have to say, you may feel that this juxtapositioning is not wholly inappropriate. But let me begin by explaining what it is that we are trying to do through monetary policy at the Bank of England, and why.
The Malaysian banking sector strengthened further and remained resilient to perform its intermediation function efficiently and effectively throughout 2001. The capital position of the banking system improved with the risk-weighted capital ratio increasing to 12.5% as at end-January 2002. Although non-performing loans had increased in 2002, it has remained at manageable levels. The net NPL ratio of the banking system stood at 8.4% as at end-January 2002, cushioned with a loan loss provision of 58.7% on the NPL amount or 146.5% if collateral are taken into consideration. The banking system continued to record profits in 2001 amounting to RM7.5 billion, which will further strengthen the capital position of the banking sector. In terms of potential risk to the banking sector, total outstanding loans in arrears have stabilised and continued to remain at manageable levels. Significant progress has been achieved in the financial restructuring undertaken by Danaharta and Danamodal. Progress in corporate debt and non-debt operational restructuring under the arrangement of the CDRC progressed at a more rapid pace in 2001 with the implementation of the new framework introduced in August. As part of debt restructuring, a number of large corporations have undertaken rigorous restructuring exercises in terms of management and ownership structure, and the disposal of non-core businesses and assets. The satisfactory progress of corporate debt restructuring under the new CDRC framework is expected to have a positive impact on the NPLs in the banking sector. The successful resolution of the larger CDRC cases has contributed towards reducing the NPL in the banking system.