We also completed our investigations into the sale and marketing of structured notes linked to Lehman Brothers by these financial institutions. Our investigation found that the nature and extent of failings identified and their potential impact on the sales process and customers differed for each institution. It is clear from our investigation findings that an across-the-board general settlement for all investors would not have been justifiable. We understand that not everyone agrees with the case-by-case approach. However, we believe it is the correct approach that is fair to all parties concerned. There are lessons from this episode for financial institutions, investors and MAS. Thus, in the third area of enhancing confidence in our financial system, we have to review the roles undertaken by all parties. MAS has reviewed the sale and marketing of structured products, and in March 2009 put out for consultation a set of proposals to further safeguard consumers’ interests and promote higher industry standards for the sale and marketing of unlisted investment products. For financial institutions, the Board and senior management must take immediate steps to win back the trust and confidence of their customers. MAS’ Fair Dealing guidelines reiterate that the Board and senior management of financial institutions are responsible for achieving fair dealing outcomes by their institutions. They will  4  BIS Review 91/2009  need to go beyond just addressing the failings identified in MAS’ investigations. One immediate area for attention is staff training.

Today, several Turkish banks are interested in expanding their operations to the Middle East, considering the growth potential in commercial relations and considerable amount of  BIS Review 101/2010  3  liquidity in the region. Besides, the Middle East is one of the world’s fastest growing markets in the banking and capital sector. Islamic finance is yet another venue through which financial links across the countries in the region may be strengthened. The global crisis has given an opportunity to Islamic financial institutions to prove their potential. As their products limit the excessive leverage and the disruptive financial innovations, they have confirmed their products’ advantages to ensure macroeconomic stability. This may lead the way for Islamic financial institutions to further expand and improve. Islamic banks support GDP growth through the use of funds they collect exclusively for the financing of real sector, rather than investing in nonproductive financial assets. This understanding will not only contribute to the potential growth of the Islamic banks, but also help to maintain a sound structure of the financial system. I believe that such a forward-looking and constructive vision will contribute the financial stability to a great extent going forward. One crucial prerequisite for closer commercial links within the region is the existence of strong, efficient and effective payment system. In the last twenty years, rapid technological progress, decrease in restrictions and globalization of financial markets have led to a rise in financial activities and a rapid growth in the volume of domestic and cross-border payments.