We now know that the truth was quite the opposite, with findings that top executives were involved in accounting malpractices over the past seven years. The reality was that while its governance structure looked good on paper, its execution had been marred by its organisational culture. According to the investigation report, top management was systematically involved in the inflation of numbers and drove the company into a place where profits were paramount. The number of similar cases reported in the media highlights how detrimental poor internal culture can be for any organisation, not only in terms of financial losses and the imposition of hefty regulatory fines, but also a potential permanent blow to the company’s reputation. Risk culture, in my view, is a key factor in determining the robustness and effectiveness of risk management in an institution. At Bank Negara, there has also been increasing focus on preserving the integrity and trust in our financial sector. Last year, the Bank published the enhanced Corporate Governance framework for financial institutions in Malaysia. The enhancements relate to expectations for the board and senior management to set the right “tone from the top” and play a more critical role in shaping the core values and culture of the institution. This includes expanded requirements on compensation practices and disclosures to strengthen market discipline, as well as putting in place a transparent whistleblowing policy that enables the escalation of concerns without the risk of reprisal.

First, is its strength that is derived from the emphasis on having a close linkage between Islamic financial transactions and economic activity and from having built-in checks and balances which inherently make Islamic finance a stable form of intermediation. Second, are the initiatives that have been taken to strengthen the international infrastructure of Islamic finance to promote the sound and orderly development of Islamic finance. Importantly, these initiatives are being taken while the Islamic financial institutions and Islamic financial markets are still at a relatively early stage of development. BIS central bankers’ speeches  1  With its internationalization, Islamic finance will contribute to the more efficient mobilization and allocation of funds across regions. This trend will also strengthen the international financial and economic interlinkages between jurisdictions, bringing with it mutually reinforcing gains. It also influenced the patterns of global financial and economic integration, in particular, facilitating the revival of financial and economic integration between Asia and the Middle East and between emerging economies and the more established financial markets, thereby contributing towards a more balanced growth in the global economy. Initiatives to strengthen the cross-border financial stability framework As Islamic finance increasingly expands beyond national boundaries, it has called for developing the framework for cross-border financial stability to further strengthen the resilience of Islamic financial system and to address cross-border challenges in an integrated manner. This recent decade has seen such international cooperation and collaboration to safeguard financial stability in the international Islamic financial system be taken to a new level.