There is no withholding tax on the profit realised from investments in these ringgit denominated bonds. The International Finance Corporation and the International Bank for Reconstruction and Development have since issued their first ever Islamic bond issuances in Malaysia. The total issuance amounted to RM1.3 billion, all of which were over subscribed. A portion of these papers was purchased by non-resident investors, indicating foreign interest in the ringgit denominated instruments. On the availability of credible and timely information, the Malaysian regulatory framework, reinforced with the adoption of best practices, has created an environment of greater transparency and richness in financial market information. The financial regulators provide extensive information about the Malaysian economy and Malaysian financial system, including regulatory requirements. The Bank also has put in place several websites that provide market information on the issues that are available for the market participants. Finally, on the capacity for diversification and risk management in the Islamic financial system, while being relatively small compared to the conventional system, it is expected to expand as the financial system strengthens and as new products are introduced. In the context of this financial infrastructure, the Malaysian Islamic financial system is both robust and fast growing. The market has highly diversified players, with Islamic banks, investment banks, takaful companies, development financial institutions, savings institutions, fund management companies, stock brokers and unit trusts. The Malaysian Islamic financial market has already introduced a variety of Islamic financial hedging instruments, including the Islamic profit rate swap, Islamic cross-currency swap and Islamic forward rate agreement.

Confidence in the Swedish banks declined dramatically and they had problems in continuing to finance their short-term loans on the international interbank market. The bank crisis was upon us. To prevent the system from collapsing, the central government was forced to rapidly intervene with a general, overall blanket guarantee that promised that all of the Swedish banks would meet all of their obligations, existing and future, towards all types of lender. All in all, the bad loans for the seven largest banks, when they were finally mapped out, amounted to 12 per cent of GDP. Six of these banks risked falling below the minimum limit for their capital buffers and therefore needed more capital from their owners or from the central government. An important principle in managing this crisis was that banks that were not viable would be closed down and their owners would lose capital. One bank was closed down and its assets were transferred to another bank, while the original bank was declared bankrupt. The effects of the crisis The effects of the crisis were considerable, not only for the banks but also for society as a whole. Growth fell drastically and was negative for three years in a row. Unemployment rose from just under 2 per cent to over 8 per cent between 1990 and 1993. However, the effects were also substantial with regard to the financial system itself. As I see it, there are two reasons why the financial crisis in Sweden developed as it did and was so damaging.