Download the booklet on Bank Negara Malaysia - InsuranceInfo
Download the booklet on Bank Negara Malaysia - InsuranceInfo
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FINANCIAL STABILITY<br />
Financial stability refers to an envir<strong>on</strong>ment<br />
where instituti<strong>on</strong>s in a financial system are<br />
str<strong>on</strong>g and can c<strong>on</strong>tinue to meet <str<strong>on</strong>g>the</str<strong>on</strong>g>ir<br />
c<strong>on</strong>tractual obligati<strong>on</strong>s without interrupti<strong>on</strong><br />
or without any external assistance. Market<br />
participants can also c<strong>on</strong>fidently enter into<br />
transacti<strong>on</strong>s at prices that do not change<br />
substantially over short periods when <str<strong>on</strong>g>the</str<strong>on</strong>g>re<br />
has not been any changes in market<br />
fundamentals.<br />
Why is financial stability important?<br />
Financial stability creates a c<strong>on</strong>ducive<br />
envir<strong>on</strong>ment for businesses to undertake<br />
<str<strong>on</strong>g>the</str<strong>on</strong>g>ir activities and for savers and investors<br />
to enter into short-term or l<strong>on</strong>g term<br />
c<strong>on</strong>tracts.<br />
As <str<strong>on</strong>g>the</str<strong>on</strong>g> financial sector has a central role<br />
in promoting ec<strong>on</strong>omic growth, it is<br />
important that <str<strong>on</strong>g>the</str<strong>on</strong>g> financial system is<br />
str<strong>on</strong>g, resilient and efficient in mobilising<br />
savings and undertaking lending activities.<br />
It is vital that this intermediati<strong>on</strong> process<br />
c<strong>on</strong>tinues uninterrupted even in periods<br />
of ec<strong>on</strong>omic difficulties.<br />
As <str<strong>on</strong>g>the</str<strong>on</strong>g> nati<strong>on</strong>'s regulatory authority,<br />
<strong>on</strong>e of <str<strong>on</strong>g>the</str<strong>on</strong>g> fundamental roles of <strong>Bank</strong><br />
<strong>Negara</strong> <strong>Malaysia</strong> is to develop a sound<br />
banking system that resp<strong>on</strong>ds to <str<strong>on</strong>g>the</str<strong>on</strong>g><br />
changing needs of <str<strong>on</strong>g>the</str<strong>on</strong>g> ec<strong>on</strong>omy and<br />
society, a system that is made up of<br />
str<strong>on</strong>g and resilient financial players and<br />
well-functi<strong>on</strong>ing financial markets. In<br />
<str<strong>on</strong>g>the</str<strong>on</strong>g> c<strong>on</strong>text of preserving financial<br />
stability, <strong>Bank</strong> <strong>Negara</strong> <strong>Malaysia</strong> has also<br />
been entrusted to regulate and develop<br />
<str<strong>on</strong>g>the</str<strong>on</strong>g> insurance sector to be an effective<br />
mobiliser of l<strong>on</strong>g term savings and<br />
provide wide range of insurance products<br />
while protecting <str<strong>on</strong>g>the</str<strong>on</strong>g> interest of policy<br />
owners. The overall objective of financial<br />
stability has been achieved not <strong>on</strong>ly<br />
through <str<strong>on</strong>g>the</str<strong>on</strong>g> formulati<strong>on</strong> of str<strong>on</strong>g legal,<br />
regulatory and supervisory framework,<br />
but also through <str<strong>on</strong>g>the</str<strong>on</strong>g> development and<br />
streng<str<strong>on</strong>g>the</str<strong>on</strong>g>ning of new instituti<strong>on</strong>s and<br />
system infrastructure.<br />
Financial<br />
stability<br />
creates a c<strong>on</strong>ducive<br />
envir<strong>on</strong>ment for<br />
businesses to<br />
undertake <str<strong>on</strong>g>the</str<strong>on</strong>g>ir<br />
activities and for<br />
savers and investors<br />
to enter into<br />
c<strong>on</strong>tracts<br />
7
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