Second, the Federal Reserve and African central banks maintain direct operational ties through the U.S. dollar correspondent and custody accounts that many central banks in this room hold at the New York Fed. African countries represent approximately one-quarter of the total number of the Federal Reserve’s foreign official accountholders, the second largest regional representation, with some very long-standing account relationships. Let me speak for a moment about the role of our services to the global central banking community. The Federal Reserve’s provision of U.S. dollar account services to the global official community stems from our recognition that central banks around the world have a mutual need for correspondent banking and custody services to execute on core central banking functions in which the safety, confidentiality, and reliability of service provision is essential. Given the global 1/2  BIS central bankers' speeches  role of the U.S. dollar as a reserve currency, we recognize the special role that our account infrastructure plays in supporting policy implementation by central banks around the world. As such, we devote significant attention and resources to maintaining a robust operational and risk management culture. This allows us to continue to provide these services for the benefit of the global central banking community. This brings me to the third reason why enhancing relationships with African central banks is a high priority for us, and that is the need for stronger dialogue on the evolving risk environment in cross-border payments.

Along with technological advancements which bring about more efficient ways of conducting financial services, globalisation and liberalization of markets are amongst today’s major forces of change that are transforming the global financial landscape, blurring the geographical borders in doing business and increasing competition in the financial sector. Moreover, the recent global financial crisis has brought about several important developments that are shaping the global financial landscape. One that is relevant is the increasing awareness and appreciation amongst the international financial community on the distinct nature and inbuilt strengths of Islamic finance. The crisis thus has provided an opportunity for Islamic finance to strategically position itself as a stable form of financial intermediation. A few challenges stood before us – ongoing global reform that is going to change the contour of financial regulation, challenges associated with a general public distrust on the financial sector, general suspicion on  BIS Review 87/2010  1  financial innovation, and constant competition from other financial centers aspiring to take advantage of opportunities in Islamic finance as a new area of growth. Against these developments, we need to rise above these challenges whilst transitioning into the next level of its development. This will require rethinking of existing product structures and formulating new ones. New products being developed must also be competitive, meet the greater sophistication of customers’ needs and distinct from financial solutions offered by conventional banks. As new players enter the industry, the competition for the best talent would become more intense.