INTRODUCTION Tan Sri Dr. Zeti Akhtar Aziz, Governor of Bank Negara Malaysia
Tan Sri Azman Hashim, Chairman of FSPB,
Members of the FSPB Board,
Distinguished Guests,
Members of Media,
Ladies and Gentlemen, a very good morning.
- I am honored to be here this morning to witness the launch of the Financial Services Professional Board (FSPB), a joint initiative between Bank Negara Malaysia, the Securities Commission Malaysia and the financial services industry.
- I am particularly delighted that we have been able to appoint such a distinguished inaugural board of the FSPB, under the leadership of Tan Sri Azman. I would like to congratulate all members of the board on your appointment and thank you for accepting our invitation to be on the Board. I am confident that with your collective expertise, insight and wisdom, you will effectively guide FSPB into fully realizing ourshared vision for high standards of ethics and professionalism to become synonymous with financial services industry.
Ladies and Gentlemen,
- Emerging economies today drive global growth, account for a rising share of capital spending and hold an increasing proportion of global financial assets. Hence, the ability of our domestic financial markets to support economic growth becomes increasingly critical. Central to this is the integrity of the financial system.
- Over the last 20 years, we have witnessed a number of crises, affecting markets including the Asian crisis, dotcom bubble, the Enron scandal and the global financial crisis among others. Very often underlying these events is some aspect associated with poor governance, misconduct and a lack of ethics and professionalism, which has severe ramifications on the trust and confidence that is integral to markets and the financial system. As the tide recedes from the aftermath of these crises, regaining trust and confidence in the financial system must become a key driving force for all of us associated with the financial services industry.
SIGNIFICANCE OF GLOBAL STANDARDS
Ladies and Gentlemen,
- Financial markets have become increasingly complex. They have become very large, as participants have exploited economies of scale in an attempt to become more operationally and cost efficient. With size, concentration has grown; as a result, firms, services and infrastructures have become difficult to substitute. And with the conglomeration of firms, through deregulation as well as globalisation, markets are becoming increasingly interconnected.
- The response by regulators to an increasingly complex and connected financial market has been swift and comprehensive.
- Reforms are being undertaken to address a problem perceived to be universal – but problems are seldom universal, rather, they appear within a context.
- Traditionally of course regulation involves imposing a set of rules and taking supervisory actions that aim to change the behaviour of regulated participants. For instance, the setting of standards – such as conduct, product quality – aims to promote market confidence in the face of adverse-selection and remove information asymmetry.
- A change in the thinking over the rationale of market regulation is reflected in the global regulatory agenda for the international financial system. In response to the financial crisis, global standard-setters like IOSCO have been called on to make recommendations for the regulation of securities markets, as part of an international effort to support global financial stability through the reduction of systemic risk.
- In the Malaysian context, we recognise the importance of having benchmarked against internationally-recognised standards which reflects the strength and robustness of the regulatory framework. Our collective effort in meeting international standards, including international accounting standards, has put us in a position of strength by ensuring that our regulatory framework remains appropriately balanced, focused and forward-looking.
OUR REGULATORY APPROACH
Ladies and Gentlemen,
- Against this backdrop, the SC continues to focus on encouraging better business conduct to create a more competitive, efficient and investor-centric market. We remain committed to ensuring investors’ needs are prioritised and managed by firms that are fit and proper, with the right governance mechanism and internal checks and balances.
- Regulatory objectives however cannot be met on the strength of regulatory efforts and discipline alone. It is imperative that market and self-discipline support regulatory discipline to ensure confidence and fairness in the markets. It is when all three disciplines – regulatory, market and self – are functioning effectively that the optimal balance of facilitative regulation, market integrity and investor protection can be achieved.
- For good governance to become a part of the capital market, regulatory discipline must be complemented by robust market-disciplinary mechanisms. The recent issuance of the Malaysian Code for Institutional Investors in June this year,which is a code and set of best practices developed by Malaysia’s largest institutional investors, represents a significant progress in our efforts to integrate the culture of disclosure, continuous engagement and management of conflicts into the financial system.
Malaysia is the first Southeast Asian country – and the second both in Asia and among emerging markets – to issue a code for institutional investors aimed at improving governance among their investee companies.
THE IMPORTANCE OF SELF-DISCIPLINE
Ladies and Gentlemen,
- Regaining public trust and confidence requires a stronger ethical dimension to individual participants’ actions – good behaviour however cannot merely be legislated and regulated, it must be encouraged and internalised. Market growth will only be sustainable if our regulatory and governance framework is underpinned by a culture of accountability and propriety.
- In this regard, greater self-discipline among market participants reinforces efforts undertaken by regulators in areas that include, amongst others, culture, level of professionalism and fair treatment of consumers and investors. This duty is even more demanding today with heightened expectations on governance. As such, market professionals, must “walk the talk” of good behaviour, with focus on a relational and long term investment culture aimed at value creation for stakeholders.
- We believe that the establishment of standard setting bodies – such as the FSPB – will play an essential role in self-discipline within the financial system. Industry led initiatives, where industry experts come together to govern themselves through establishing industry-wide standards and practices, is key in enhancing market conduct. FSPB will come to exemplify this approach.
SETTING HIGH STANDARDS OF PROFESSIONALISM AND ETHICS
- What investors and the public need most today is assurance and accountability in the broadest sense. Over and above compliance with the rules and regulations, this requires conduct which embraces moral and ethical considerations, understanding and management of risks, and the creation of sustainable value. Investor and public confidence are premised on the integrity of markets and their participants. Only through taking appropriate decisions and achieving positive outcomes, will trust in finance be maintained.
- Given the important role of financial services professionals in dealing with consumers and investors as well as the sustainable growth of organizations, financial markets and economies, a strong culture of professionalism and ethics in the financial industry is central to its long term sustainability.
- In its unique role, FSPB will undertake this task in a collaborative manner, with the collective support and commitment from all participating stakeholders, many of whom have much to gain from such a measure. This collaborative effort has the potential to draw from, and even foster the formation of shared values among industry participants, creating a stronger sense of participation in the standards setting process that reflect such common values and incentivising voluntary adoption of such standards.
CONCLUSION
Ladies and Gentlemen,
- The establishment of FSPB is an exciting development in the Malaysian financial services landscape. This is particularly timely given our involvement and leadership in ASEAN and Emerging Market initiatives.
- The expedition of bringing FSPB’s mandate into reality will not be without challenges. I am however confident that FSPB, with its prominent board members, will play a critical role in the landscape and continue to develop its scope through continuous engagement with industry participants and regulators.
- On that note, I would like to wish the Chairman and the Members of the Financial Services Professional Board the very best in meeting the objectives set and I look forward to their contribution for a stronger financial services industry.
Thank you.
