Welcoming Remarks
YBhg Tan Sri Zarinah Anwar
Chairman of the Securities Commission Malaysia

at the
World Capital Markets Symposium

27th September 2010
Kuala Lumpur, Malaysia


Yang Amat Berhormat Tan Sri Muhyiddin Mohd Yassin, Deputy Prime Minister of Malaysia,
His Royal Highness Raja Nazrin Shah Ibni Sultan Azlan Muhibbuddin Shah, the Crown Prince of the State of Perak Darul Ridzuan and Financial Ambassador for the Malaysia International Islamic Financial Centre
Honourable Ministers,
Yang Amat Berbahagia Tun,

Distinguished guests speakers, ladies and gentlemen,


On behalf of the Securities Commission Malaysia, let me begin by bidding all of you a warm welcome to the 2nd World Capital Markets Symposium, Kuala Lumpur. With the favourable feedback from participants and insightful perspectives on the global financial crisis at the inaugural symposium which was held last year, we were very encouraged to follow up with another edition of the World Capital Markets Symposium.


Since we last met, the world economy and markets have experienced gradual recovery. We will have an opportunity at this Symposium to hear from leading economists and policy-makers on the prospects for a more sustained recovery. There is also an urgent need for us to exchange views on the regulatory reforms that are being implemented in different parts of the world. The current efforts at re-regulation have significant and long-term implications for the future landscape of financial and capital markets. We should therefore take advantage of the presence of many prominent thought leaders, policy makers, regulators and leading market practitioners at today’s symposium to debate on potential solutions and future paths to position the capital markets for sustainable growth.

Ladies and gentlemen,

A brief overview of the transformation of capital markets


The last two decades have marked the remarkable ascent of capital markets in the functioning of the global economy. In 1990, global equity market capitalization amounted to only USD10.4 trillion and was less than half the size of the world economy. At its peak in 2007, global equity market capitalisation had risen six-fold to USD64.6 trillion, about 1.17 times nominal global GDP.


During this period, capital markets played a key role in financing the development of a diverse and vibrant global economy based on knowledge, innovation and productive investment. The pace of financial innovation was fast and furious. But as we saw, poor governance and abuse of innovation, bred crises and eventually became a source of instability. A major part of the uncertainty and risks emanated from increasing product sophistication and complexity, a broadening of asset classes and the increasing volume of business conducted across borders at high-speeds facilitated by technological connectivity.


While the market landscape was rapidly changing, in contrast the boundaries and parameters of regulation remained relatively static. Gaps in regulatory coverage appeared, as innovative financial practices evolved at great speed around the world. In particular, the advent of securitization permitted a breakdown in accountability. Players used highly complex transactions to report non-existent profits and to disguise risk transfers and high leverage.


Global regulators are now approaching a cross-road as they deliberate on the appropriate regulatory structure and the balance of regulation required to allow markets to thrive, yet address the instability associated with past crises. We are fortunate to have with us many of the world’s leading thinkers, regulators and policy-makers with us today to shed some light on these conundrums and future regulatory direction. It is likely that the change in regulatory philosophy will not come through the passage of a single piece of legislation but rather, it requires innovation in regulatory solutions to match the innovation in the financial activities that are intended to be regulated.

Ladies and gentlemen,

Leadership and governance


Poor governance plays a significant role in most financial crises and this was again apparent in the most recent crisis where poorly-designed incentive structures led to weak stewardship and lapses in risk controls. The crisis also re-affirmed the lesson that stress points in regulatory regimes tended to eventually give way to market abuse and disruption.


Yet, does the recent crisis mean that the burden of regulation must now rest squarely on the shoulders of regulators. Regulators have always aspired for the private sector and markets to regulate themselves, thus lessening dependence on the regulator – which should, both in theory and practice, act as the last line of defence.


Can innovation thrive if regulators are required to underwrite the complexity of financial innovation and how can regulatory costs be minimized if this was the case. Surely, markets are now sufficiently mature such that intermediaries and professionals can take on greater responsibility and expand their role in ensuring more effective governance. We believe that the quality and future success of our capital markets rest greatly on how well our stakeholders govern themselves.


There is therefore a need to review governance arrangements straddling a broad front, including institutions that have regulatory duties, intermediaries and professionals that have fiduciary obligations to put their customers’ interests ahead of their own, market venues that need to maintain a transparent, fair and orderly trading environment and boards of directors who need to exercise greater stewardship and ensure a fair deal for all their stakeholders.


In this regard, there is still a sense that the private sector has not really internalised the value of ethical conduct and responsibility to other stakeholders. Preventing a recurrence of a financial crisis requires not only reforms to financial regulation but perhaps more importantly, a change in the mindset of market participants. It is important that we all work together to achieve positive changes in the attitudes of all stakeholders in line with public expectations.


It is up to industry leaders to set the tone at the top to increase earnestness in the practice of governance and to ensure business operates with a conscience. Leaders of intermediaries and PLCs must rise to the occasion to act as stewards of the interests of the ordinary investor and increase their commitment towards governance and ethical conduct.


Ultimately, high growth is best achieved through a confluence of investor confidence and private sector responsibility. Given the critical role that markets play in a modern economy, all players in the capital market must care about the consequences of their actions on society. We must all bear responsibility for the outcomes of our action.

Concluding remarks


This year’s symposium coincides with the Securities Commission preparations for the Capital Market Master Plan 2, a document to chart the strategic direction of Malaysia’s capital market for the next ten years. Certainly, these deliberations are timely and we will be most attentive to your thinking and views as to the evolution of securities regulation to keep pace with innovation and to manage changes in risks and public expectations.


Ladies and gentlemen, the Honorable Prime Minister, Dato’ Sri Mohd Najib Tun Abdul Razak has extended his strong support for this Symposium. I would like to express our deepest gratitude to him for his counsel and encouragement. I would also like to express our immense appreciation to the Honourable Deputy Prime Minister, for officiating and delivering the keynote address on behalf the Prime Minister this morning. Your presence here Tan Sri means a great deal to all of us.


To His Royal Highness Raja Nazrin Shah, thank you for gracing this event Tuanku, and for the support and encouragement you have always shown the Securities Commission.


I would also like to thank all ministers, speakers and delegates from Malaysia and abroad for accepting our invitation to participate in this Symposium. Almost 600 people from 25 different countries have registered for this event are present here this morning. We are extremely grateful for the effort you have made to be here with us.


Finally, I would like to thank our co-sponsors the Capital Market Development Fund and Maybank, and our global, regional and local media partners, as well as more than the 30 other media organizations covering this event.

Ladies and gentlemen, from the bottom of my heart, Thank you.