In addition, as this buffer is demanded on all exposures, nothing guarantees that its release will affect the provision of credit in a specific jurisdiction. The other instrument in the macroprudential policy-maker’s toolkit to address non-cyclical risks is the systemic risk buffer. Here, we welcome the European initiative to allow its application to sectoral credit portfolios, thus providing it with more flexibility. Finally, let me also stress that, for the moment, the bulk of macroprudential tools affect banks exclusively. While banks continue to account for most financial intermediation, they are losing relevance and could do so even more in the future. This can give rise to regulatory arbitrage and undermine the effectiveness of macroprudential tools. The Spanish case is to some extent innovative5, as similar borrower-based tools to those granted to the Banco de España were given to the financial markets authority (CNMV) and the insurance supervisor for their own sectors. Thus, one of the tests for the Spanish macroprudential institutional setting will be whether it is able to achieve enough coordination across authorities to maximise the effectiveness of the macroprudential toolkit. In any event, we should bear in mind that global financial integration can also have similar effects to the domestic development of the non-bank financial sector, with banking and non-banking entities operating in different jurisdictions. Especially in this last area, major steps have been taken (with reciprocity agreements); but there is still ample room for improvement. I am sure we will be able to address these challenges in future editions of this conference.

Zeti Akhtar Aziz: Islamic finance developments in Malaysia Address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Launch of Public Islamic Bank Berhad, Kuala Lumpur, 3 March 2009. *  *  *  It is my pleasure to be here today on the official launch of "Public Islamic Bank Berhad". This marks the transformation of the Islamic window operations into an Islamic subsidiary, a dedicated institutional structure that will give greater focus to Islamic banking business operations. The continued progress of Islamic finance in our financial system has demonstrated that despite the on-going global financial crisis, it has not discouraged the further expansion and development of Islamic finance. Malaysia now has a total of 17 Islamic banks, of which nine (9) are the subsidiaries of the domestic banking groups. The underlying philosophy for the incorporation of an Islamic subsidiary is primarily aimed at further strengthening the institutional structure for Islamic banking business operations. Financial institutions which have achieved a critical mass in their Islamic banking business, have migrated from their Islamic banking window operations to an Islamic subsidiary. The establishment of Islamic subsidiary has greater potential to complement the goals of the banking group by providing business flexibility and autonomy to the Islamic subsidiary. Currently, the Islamic banking system in Malaysia has successfully positioned itself as a robust and competitive component of our financial system.