Monetary policy and financial sector development
To achieve developed country status by 2020, Malaysia will need sound monetary policy and a strong, efficient financial sector. These will be crucial for fuelling growth and triggering economic transformation. The Malaysian financial system is still dominated by the banks. However, the cost of banking is low in Malaysia relative to other countries in the region (Kalra 2010), in part because of a series of financial reforms and market liberalizations undertaken after the Asian financial crisis in 1997-98. Two master plans launched in 2001 spearheaded the process of financial reform: the Capital Market Master Plan and the Financial Sector Master Plan. During the ensuing period the banking sector underwent major restructuring, consolidation and rationalization (Zeti 2007). This meant that Malaysia’s financial institutions were not greatly affected by the global financial crisis of 2007-2009, because they had already deleveraged after the Asian financial crisis.