The Master Plan would allow countries the option to evolve the financial system sequentially, or alternatively the option to accelerate the process of development by providing countries the opportunity to develop the institutions and supporting infrastructure simultaneously. Significance of banking system At the outset, due attention needs to be given to promoting the development of a comprehensive Islamic financial system, involving the development of the key structural components of the system, comprising the Islamic banking industry, the takaful industry, the non-bank financial institutions, and the Islamic interbank and capital markets. The comprehensiveness of the system will allow for a more balanced allocation of financial and economic resources within an economy and ensure greater diversification of risks within the Islamic financial system. This enhances the resilience and robustness of the Islamic financial system to withstand financial shocks and contributes to the overall stability of the Islamic financial system. The respective components of the Islamic financial system are also highly integrated and inter-dependent. A more diversified Islamic financial infrastructure will contribute to the more efficient functioning of the overall financial system. Given its roles in the intermediation process and payments system, the Islamic banking system will continue to be at the core of the Islamic financial system. A well functioning and efficient banking system is vital for achieving robust economic performance. As financial intermediaries, banks are entrusted to safeguard their deposits and preserve the efficiency in the manner the funds are mobilised, while vigilantly channeling these savings to productive investments.

By combining these two instruments, the SNB is able to determine the volume of liquidity it wants to drain from the system, thereby influencing the three-month Libor. The SNB continues to use a three-month Libor target range as its reference band for monetary policy. The use of SNB Bills and reverse repos The SNB has been issuing SNB Bills since October 2008. At beginning of this month, a secondary market for buying and selling these short-term debt certificates was established. This secondary market improves market liquidity. SNB Bills have other advantages. First, their flexible terms can be adapted to the monetary policy objectives. Second, they permit greater flexibility and can be issued at high volumes. The SNB has been stepping up the issuance of SNB Bills since March 2010. It currently offers SNB bills with terms ranging from one week to three months. The total amount of SNB Bills outstanding last week amounted to about CHF 80 billion. This made it possible to reduce sight deposits to around CHF 70 billion. SNB Bills and reverse repos are characterised by their extraordinary flexibility, allowing for an efficient implementation of monetary strategy that is fully compatible with the monetary policy concept that has been proven and tested for several years now. In employing these instruments, the SNB continues to operate in an environment that is both familiar to and stable for its different partners. It is nevertheless ready to adjust its monetary policy instruments quickly, should this be required by developments in the financial markets.