Efforts are now underway to address many of the shortcomings in the financial infrastructure that have contributed to the crisis. With the worst of the crisis now seemingly over, attention has turned to strengthening the global financial system. There is now an even greater need to restore confidence in the integrity of the global financial system given the loss of trust between society and the financial sector particularly in advanced economies . At the core of this reform agenda is the development of a new financial regulatory framework that would be more effective, one that is premised on greater emphasis on ethics, fairness, and accountability and that promotes global economic, social and environmental sustainability. It also needs to be anchored on a sensible balance of supporting growth while maintaining financial stability , and one founded on greater international coordination of regulatory approaches and supervisory oversight with a crisis management framework that will reduce systemic risk, and the severity of any such future financial crises. Given the scale and magnitude of this recent crisis, the global regulatory reform being shaped is wide-ranging. Bold measures are being developed in various international forums with fundamental changes to the current approaches to financial regulatory and supervisory oversight. Some of these reform proposals have attracted intense international debate generating divergent views on these issues. A broad consensus however is emerging on the need to raise both the quantity and quality of regulatory capital, strengthen liquidity rules and improve market transparency.

As Islamic finance facilitates greater financial and economic interlinkages between jurisdictions, this enhanced international dimension will bring about a new set of challenges presented by the fundamentally different operating environment of heightened competitive dynamics, greater uncertainty, and more complexity. This will require greater collaboration and cooperation at the global level in the endeavour to preserve global financial stability. The recent crisis has highlighted that financial integration across borders needs to be accompanied by international cooperation and coordination to prevent regulatory arbitrage across borders and the risk of implications for contagion. A stronger collective effort needs to ensure that Islamic finance is subject to consistent, high-quality regulation across borders through the application and enforcement of the international prudential standards promulgated by the IFSB. This would reduce the opportunities for regulatory arbitrage, which in turn, will contribute to a more successful international integration of Islamic finance. Beyond the prudential standards, a higher level of cross-border vigilance is pivotal to allow for appropriate and decisive actions to be taken pre-emptively to deal with any imminent financial distress. This underscores the importance of adequate coordination and cooperation among supervisors across borders in strengthening their responsiveness to risks associated with markets interconnectedness. In particular, more transparency is essential towards understanding the ramifications of national actions or inaction and the potential spillover effects from one country to another, whilst equally important is to recognize that financial regulation and intervention are subject to country-specific circumstances and hence, must fall within remit of national autonomy.