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Public Awareness and Consumer Protection - Core Elements and Effective Practices 3 May 2007 Presentation by: Wai Keen, Lai General Manager, Policy & International Division Perbadanan Insurans Deposit Malaysia
Agenda • Economic setting of Malaysia and some information on its banking system. • Strategic approach and rationale for strengthening consumer activism and enhancing consumer protection infrastructure. • MDIC’s public awareness strategies.
Economic Setting Economy: • Very open • GNI per capita of US$4,650 (2004) • An upper middle income economy Population: • 25 million • Very young (74% at ages 39 or below) • Majority the middle income category • Multiracial • 63% stays in urban areas and 37% stays in rural areas • High level of literacy, but low level of consumer sophistication and financial literacy
Banking Sector • Presence of foreign banks in the domestic banking industry significant. 13 fully foreign owned banks. • Malaysian-owned banks reduced from 54 to 9 presently. • Some Malaysian banks expanded operations overseas. • In 1994, all foreign-owned banking institutions required to be incorporated. • Supervisory controls over Malaysian banks venturing overseas directed at ensuring that banks have adequate risk management framework.
Financial Sector Master Plan • The Asian crisis brought into focus contagion effects of cross border problems. • Post crisis, embarked on several strategies to address future problems. • Financial Sector Master Plan (FSMP) released in 2000 - outlined 10 year program to strengthen financial system. • The plan is to: - lay a strong foundation - introduce an increasingly more competitive environment - greater international integration • FSMP promotes active consumerism – establishment of a deposit insurance system part of the measure.
Consumer Education • Malaysia has low financial literacy: - Can facilitate speedy transmission of non-fundamental contagion • Better informed investors: - Less susceptible to unsubstantiated rumours • Financial education helps consumers: - Make proper assessment of risks, quality and relative prices of diverse and complex financial products - with access to information and ability to compare information • Financially savvy consumers could impose additional discipline on banks.
Role of Deposit Insurer • Protects wealth. • Protects entrepreneurship – SMEs. • Prepares readiness of depositors to participate in an increasingly competitive and liberal banking system.
Public Awareness Strategies • Core success factor of deposit insurers - Public trust. • The more informed the depositors, the more they appreciate benefits and limitations of the system. This enhances public confidence in MDIC. • Philosophy: - Every depositor has right to deposit insurance information - We reach out and not wait to be reached
Core Elements of Our Communications Policy • Aim: to develop and cultivate a positive image of MDIC. • Must communicate openly in a manner which enhances its credibility. • Must ensure public have clear understanding of key features and benefits of deposit insurance. • Must promote acceptance and confidence that MDIC’s activities and objectives are implemented effectively and efficiently.
Our Five Strategies • Main corporate strategy - create awareness of our credibility through annual reports and corporate plans. - must have in place systems, policies, practices, better governance, transparency, standards - must be seen as a well managed and a well governed - credibility and image must be at the forefront of what we do and say • Create awareness and understanding of MDIC’s mandate. • Promote transparency and accountability. • Promote acceptance and confidence. • Deliver prompt, courteous, quality and responsive service.
Our Initiatives • Two strategic thrusts of Integrated Communications Plan 2007-2011: - Creating awareness of the deposit insurance system - Building the Corporation’s authority and credibility • Comprehensive target audience. • Outlined a number of initiatives, which includes: - Print and television advertising - Training for member institutions - Annual Deposit Insurance Awareness Week in Malaysia - Nationwide seminars and roadshows - Media interviews and article - Participation in relevant public exhibitions - Publish and wide dissemination of our policies - Reporting on our performance • Toll-free public help line, website and information brochures in 6 languages. • Allocated about 20% of budget in 2007 for communications initiatives. • Collaborate with strategic partners.
Managing Cross-border Contagion • Educate depositors on benefits of deposit insurance. • Publicise information regarding which deposit products are covered. • In the event of a cross-border failure, work closely with the Central Bank in managing perception and issue a press release or hold media and press conferences on this matter. • Strengthen international relations - establish contacts and maintain good working relationships with deposit insurers, especially within IADI. • Monitoring the health of financial systems of countries where Malaysian banks have branches.
Conclusion • Deposit insurer’s fundamental role to protect wealth and entrepreneurship. • Building credible deposit insurance system – with a strong reputation, and public awareness and consumer protection are vital to the operations, credibility and reputation of MDIC. • Educating the public is an ongoing process. Efforts in this area would remain a key initiative over the short to medium-term. • By extending our public reach, more informed and educated depositors would underpin public confidence and promote financial stability.