Or, put differently, curbing the credit cycle appears to be an important ingredient of broadly-based macro-economic stability. In principle, monetary policy could be used to curb the credit cycle. In practice, the differing duration and synchronicity of the credit and business cycles means this is unlikely to work well. Pre-crisis experience illustrates well just that point. At the same time as the wider economy was operating in cruise control, credit markets were in overdrive. Hitting these two birds – one flying high, the other low – with one (monetary policy) stone would have defied even the most astute marksman [King, 2013]. What is needed, in these instances, is a second instrument. In the language of Tinbergen [Tinbergen, 1952], two cycles and two objectives call for two instruments. This is where macro-prudential policy comes in. One of the aims of macro-prudential policy is to act counter-cyclically on the credit cycle, constraining credit booms and cushioning busts  BIS central bankers’ speeches  1  [Aikman et al, 2014]. In this role, macro-prudential policy is complementing monetary policy in its role of stabilising the macro-economy. Macro-economic policy then becomes, in effect, two-handed or ambidextrous. Since the crisis, this two-handed approach to policy has been taken up actively by a number of countries internationally [IMF, 2013]. For example, counter-cyclical prudential policy is now baked into new international regulatory rules. The so-called Basel III reforms introduced for the first time a “Counter-cyclical Capital Buffer” (CCB) to be adjusted to counteract the credit cycle [BCBS, 2010].

Intended outcome of Shariah emphasises on minimisation if not prevention of negative impact and maximising positive value creation to wider stakeholders namely people and planet. The dos and don’ts of Shariah aim to enhance people’s wellbeing by preserving five stipulated key outcomes of Shariah (maqasid) namely the wealth, faith, lives, posterity (lineage) and intellect4. In the context of financial intermediation, preserving wealth entails beyond its literal meaning – to include encouragement to generate, accumulate and distribute the wealth in a just and fair manner. ii. Secondly, real economy. Islamic financial intermediation activities must be backed by real economic activities, thus aligning innovation with the needs of productive activities. Requirement to support the real economy thereby avoids element of speculation. iii. Thirdly, partnership. Another distinct aspect of Islamic finance is the application of risksharing in financial transactions. This strengthens the incentives for both financial institutions and business clients or investors to screen and monitor transactions for commercial viability and risks. The growing momentum in global trend towards sustainability agenda does not only sharpen the focus on formulating necessary solutions to key global challenges such as poverty, food security and inequalities. Most importantly, it creates a sense of urgency for financial institutions to embrace long-term value creation mindset. Increasingly, stakeholders are setting higher expectations on financial institutions to manage the threats of climate and environmental-related risks that are real, with irreversible consequences. Failure to respond appropriately and in a timely manner may have adverse implications on the economy and direct financial consequences on financial institutions.