Sukuk has been a major driving force behind this development since its emergence as an important platform for international fund raising and investment activities that are generating increased cross border flows. The international dimension of the sukuk market has now evolved on many fronts – It has seen the participation of issuers and investors across continents with sukuk origination centres transcending the issuers’ own home countries. The total global sukuk outstanding now domiciles in 20 countries and more recently, there has also been a growing trend for multi-currency sukuk issuances. The sukuk market continues to solidify its position as a leading segment of growth for Islamic finance. Its strong performance is driven by its unique value proposition to both issuers and investors. For investors, it has now become a new asset class with orientation towards real underlying assets in which the issuer cannot leverage in excess of the asset value and in which, the financing must be channeled towards productive purposes. For the issuers, sukuk financing provides a competitive avenue for fund raising and access to a wider investor base of both Islamic and conventional, including the growing investor base looking for a sociallyresponsible or ethical investment. Moving forward, there are three key imperatives that will determine the ability of Islamic finance to further enhance its value proposition for the global economy. First, is the evolution of the legal framework that is facilitative to the continuing market evolution and the internationalization of Islamic finance.

For starters, the Federal Reserve now makes its most consequential supervisory decisions on a system-wide level through the Large Institution Supervision Coordinating Committee or “LISCC.” The committee comprises representatives across professional disciplines from several Reserve Banks and the Board of Governors. The New York Fed supplies only three of its 16 members. LISCC sets supervisory policy for the 15 largest, most systemically important financial institutions in our country and develops innovative, objective, and quantitative methods for assessing these firms on a comparative basis. LISCC also coordinates the supervision of the largest supervised institutions through its Operating Committee, which reviews and approves supervisory plans for exams, receives regular updates on major supervisory issues, and makes material supervisory decisions regarding matters that affect the firms’ safety and soundness. In this respect, the Operating Committee provides an important safeguard against regulatory capture by ensuring that no one person or Reserve Bank has the power to make a final decision on a matter of significance. Another procedural change is our increased application of cross-firm, horizontal review. This technique enables peer-to-peer comparison of banks, facilitates a better assessment of the overall health of the financial system, and safeguards against regulatory capture by providing insight from across the Federal Reserve System. The analysis is done not only at the level of the Board of Governors – for example, through CCAR and Dodd-Frank stress testing – but also within the New York Fed. We hold weekly discussions among senior supervisory and risk officers to identify developing concerns that may pose a systemic risk.