New financial services law to be tabled

KUALA LUMPUR: The new financial services legislation will be tabled in the current Parliament sitting, according to Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz.

Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2012/6/13/business/11466648&sec=business
Published: Jun 13, 2012

She said the central bank had made proposals in the legislation which would augment the general duties and responsibilities of the board under the Companies Act so as to provide emphasis to the specific key considerations in the responsibilities of boards of financial institutions.

“Boards will now need to have regard to the interests of depositors and policyholders, the long-term viability of the institution and to have in place reasonable standards of fair dealings in the oversight of the implementation of the business and risk strategies of the institution.

“The statutory duties would also include an explicit duty to ensure and oversee the effective design and implementation of a sound control environment,’’ she said in a her keynote address at the laumch of Financial Institutions Directors Education forum yesterday.

Zeti said work had also commenced to update and streamline the current regulatory guidelines on corporate governance for banks, insurers and takaful operators to reduce duplication across different standards and to sharpen the focus on the overall responsibility of the board for risk and control.

Existing prescriptive rules would give way to broader principles of behaviour, she added, noting that the review would also better align the regulatory framework with the current supervisory approach.

A thematic review of the remuneration practices in the financial sector was also planned to take into account how it might influence risk-taking behaviour, she said.

She said the environment confronting financial institutions would continue to be immensely challenging and as such a number of areas would become more important to reinforce the effectiveness of boards and sound governance.

First, board-level engagements on risk issues must to be strengthened further and this could only be achieved if boards had sound understanding of the institution’s business model, and a strong grasp of the changing complexion of risks in which the institution was exposed, Zeti said.

Second, with the growing expansion of financial institutions in scale and complexity, there was a need to inject greater diversity into boards to enable the board collectively to deal with the broader range of issues across the institution’s activities, she said. This needed to be embedded within the framework for board renewal and succession, she noted.

With increased expectations placed on boards, they (boards) would need to have the means to objectively evaluate their own performance and examine ways in which board effectiveness could be improved, she said.

Zeti added that overcoming cultural norms that impede more formal processes for open and honest engagement among peers remained a challenge.