Zeti Akhtar Aziz: 10th year anniversary of the establishment of the
Islamic Financial Services Board
Speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Islamic
Financial Services Board (IFSB) 10th Anniversary Dinner, Kuala Lumpur, 16 May 2013.
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It is my great pleasure to welcome Your Excellencies and distinguished guests to this IFSB
10th Anniversary Dinner, organised in conjunction with the 10th IFSB Summit. Tonight is a
landmark celebration of the 10th year anniversary of the establishment of the Islamic
Financial Services Board (IFSB), as we commemorate a decade of milestones and
achievements of the IFSB and pay tribute to its members and industry stakeholders that
have provided undivided support to the Board.
Bank Negara Malaysia is indeed honoured to have the opportunity to host this 10th IFSB
Summit, which is exactly ten years since we hosted the IFSB inauguration in November
2002. We are also very pleased to welcome back the Founding Members and many of the
industry leaders that witnessed the inauguration of the IFSB. We are very honoured to have
your presence at this Anniversary Dinner.
It was in the year 2000 that the discussion began on the merits of establishing a dedicated
organisation to develop a separate and distinct regulatory framework for the global Islamic
finance industry. The aspirations of ten Central Banks and the Islamic Development Bank -
was to lay the foundation for the development of a sound and stable Islamic financial system
that will pave the way for its successful integration as a viable and credible component of the
global financial system. A decade later, the IFSB has build a solid international reputation as
a credible standard-setting body for Islamic finance, with the IFSB charting its achievements
in increasing regulatory cooperation, encouraging uniformity of regulatory frameworks and
enhancing the monitoring of financial risks in the Islamic financial system.
The current global landscape of the Islamic financial system, with enhanced stability and
resilience that has contributed to the vibrant growth and internationalisation of Islamic finance
is a realisation of the aspiration and vision of the IFSB Founding Members. The efforts are
largely attributable to the unwavering commitment and dedication of the members of the
IFSB that have relentlessly pursued the goals. The increasing support for the IFSB, signified
by its continuous growth of membership over the decade would ensure a progressive
continuity in the work of the Founding Members. There are now 187 members from 43
jurisdictions. Malaysia is honoured to host the IFSB here in Kuala Lumpur, and is committed
to provide full support in the journey to achieve a sound and resilient Islamic financial
services industry. Strong international cooperation and collective support from member
Central Banks and regulatory authorities of the IFSB and global institutions, as well as the
strong connectivity with other international standard setting bodies and relevant
organisations would ensure continuous close engagements that would allow the attainment
of balanced views.
The IFSB has had a key role in shaping the global Islamic financial industry, with a decade of
achievements that have provided a solid foundation for the progressive growth of Islamic
finance that is underpinned with stability. Significant contributions have been made by the
IFSB in realising the recommendations in the eight building blocks identified in the Islamic
Finance and Global Financial Stability Report 2010, particularly in the areas of prudential
standards and liquidity management. It is encouraging that the cross-sectoral prudential
standards issued by the IFSB since 2005 have now been implemented in nine countries and
more are expected to follow as we progress forward. These standards have taken into
account the distinct characteristics and specificities of Islamic finance. The effective
implementation of these standards contribute to promoting the soundness and stability of
Islamic financial institutions. There has also been strong support by the IFSB for its members
to effectively implement the standards through technical assistance that aims to enhance
juridictional preparedness in adopting the standards. The initiative of the IFSB to establish
the International Islamic Liquidity Management Corporation (IILM) in 2010 is also a major
breakthrough in strengthening the liquidity arrangements for the international Islamic financial
system, particularly in facilitating more efficient cross-border liquidity management by Islamic
financial institutions.
The Islamic Financial Stability Forum (IFSF), set up by the IFSB in 2010, is another
milestone in strengthening collaborative efforts amongst IFSB members by providing a
platform for constructive dialogues for regulators to deliberate on issues relating to financial
stability. Seven meetings have been organised since the first IFSF held in Khartoum, Sudan
in 2010. A wide range of common issues pertaining to risks to financial stability of the Islamic
financial system have been deliberated, all of which have the potential to further solidify
global efforts in the areas that will contribute towards safeguarding financial stability.
A joint initiative between IFSB and the Islamic Research and Training Institute (IRTI) to
develop the Ten-Year Framework and Strategies for the development of the Islamic financial
services industry that was released in 2007 has also provided guidance to national
authorities in their initiatives to develop Islamic finance within their jurisdictions. A review of
the framework was conducted in the recent IFSB-IRTI Roundtable Discussion in Doha and in
the Pre-Summit Event of the 10th IFSB Summit two days ago. It is hoped that the
assessments would provide further synchronisation to the implementation of the strategies.
The IFSB has also paved the way for greater awareness on issues relating to regulation and
supervision of Islamic finance through its active organisation of international conferences
such as the IFSB Summits, seminars, workshops, meetings and dialogues that have been
staged in many countries in different parts of the world.
The milestones and achievements of the IFSB in the modern history of Islamic finance is a
culmination of various collective wisdoms that have charted the path of the IFSB. In a
decade, the IFSB has had the opportunity to be under the stewardship of all nine Founding
Members that have successfully held the Chairmanship of the Board. As a Founding
Member, it is indeed an honour to witness the crystallisation of ideas that had been
envisioned to build a robust and sound Islamic financial system.
The journey of the IFSB in these ten years was however not without its challenges. As we
continue our journey ahead, the forces of globalisation, financial liberalisation, technological
advancements, intensified competition, financial innovation and internationalisation of Islamic
finance would create new risks that are more complex and with more profound systemic
implications. It has therefore become more demanding and challenging for prudential
regulation and supervisory oversight to manage these risks. In cognisant of this increasingly
challenging environment, the role of the IFSB remains instrumental and a more robust and
forward looking IFSB would indeed contribute towards a more effective policy response.
More strategic partnerships would also expand the IFSB's capabilities in research, training
and provision of technical assistance, all of which are critical to the development of the
industry. Continued and stronger support for the IFSB, including active feedback from
members on its Consultative Papers and participation in IFSB related events, as well as
greater collaboration and cooperation between the members would further support the work
of the IFSB. Consistent implementation of the prudential standards issued by the IFSB also
enhances regulatory harmonisation and promotes full adoption of the standards. Of
importance is the need for the IFSB to ensure that regulatory standards remain not only
adaptive and effective in the changing regulatory environment, but also in riding the
evolutionary waves of financial innovation that is prevalent in Islamic finance.
Our quest and shared aspirations for financial stability requires concerted efforts on all fronts
to foster a resilient and sound global Islamic financial system. The IFSB is an important part
of these endeavours and its work remains relevant as we face a time of increasing
uncertainties. The strategies identified in the IFSB's Strategic Performance Plan for the year
2013 to 2015 provides the focus for the IFSB to achieve the key result areas charted in the
roadmap. I am confident that the IFSB would effectively manage its journey ahead amidst the
increasing challenges, with the collective support from its members.
Indeed, we look forward to the constructive outcome of the deliberations during this 10th
IFSB Summit. We also hope that you will also have the opportunity to experience Malaysia
during your time here. On that note, I thank you for your attention.