But if we were to find a single factor that has brought the crisis to a head and magnified its damaging effects, we should be looking, not to ‘crony capitalism’ or ‘Asian values’, but to a more specific and more universal phenomenon: the swift flow of large amounts of heavily leveraged capital into and out of the region through an international financial system that is globalised, liberalised, technologically advanced, but, from an international point of view, largely unmanaged and unregulated. 3. The freedom of capital flows is, of course, essential to effective financial intermediation in the international dimension, which has played a vital role in promoting economic development in this region. But, as the current crisis has shown, it also has the potential to distort, disrupt or even destabilise domestic financial markets: this applies not just to ailing economies, but also to sound ones. Being small and open, with predictable policy responses, their markets are susceptible to manipulation. As you know, last summer Hong Kong was exposed to this problem in an extreme form, and we took radical and controversial measures to address it. We remain convinced not only that what we did preserved our financial system 1  BIS Review 35/1999  from a serious threat to its stability at a time of stress and uncertainty, but also that our actions were entirely consistent with our responsibilities as a government mandated by law to safeguard the free operation of financial business and the free flow of capital within, into and out of Hong Kong.

Zeti Akhtar Aziz: Enhancing global interlinkages in the international Islamic financial system Opening speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the launch of Commodity Murabahah House, Kuala Lumpur, 17 August 2009. *  *  *  It is my great pleasure to be here, this afternoon, on this occasion of the launch of the Commodity Murabahah House. The establishment of the Commodity Murabahah House is, indeed timely, as the international financial crisis is gradually stabilising and the global economy is entering into a period of recovery. This decade has seen Islamic finance enter into a new phase of development, as its international dimension gains significance. Of significance, is that the international financial crisis has not discouraged this trend. The Islamic financial system has continued, during this period, to become increasingly integrated with the international financial system. However, as this inter-connectivity intensifies, the exposure to risks arising from financial and economic developments from other jurisdictions will increase. Essentially, international Islamic financial transactions will require the development of the supporting financial infrastructure, in particular, the systems and structures for the management of liquidity. Malaysia has taken several initiatives to strengthening the international dimension of our Islamic financial system during this decade, to increase our inter-linkages with other parts of the world. In 2002, the Malaysian Government became the first to issue a global sukuk. In the same year Malaysia was in the pioneer group that established the Islamic Financial Services Board that sets international prudential standards for Islamic finance.