Yet little, if anything, is done today to consider how such risks need to be managed – both for existing portfolios and future growth strategies. Actions taken by financial institutions to mitigate, transfer or control the risks have the potential to generate corresponding, broader responses by policymakers, businesses and other financial institutions. This in turn can create new markets for sustainability services, and a virtuous cycle of mutually reinforcing market forces, that promote sustainable business practices across the economy. As we further develop the VBI systems for Islamic finance in Malaysia, this will be an area of important focus. This work will also address the role of domestic regulations, in creating a level playing field, for value-based banking practices, where appropriate. To date, policy documents developed on 14 Shariah contracts, serve to provide a clear and consistent framework for lending, underwriting and investment activities of Islamic financial institutions. I am encouraged by efforts among some Islamic financial institutions to introduce value-adding innovations, building upon these Shariah contracts, and further differentiating their solutions from conventional offerings. I would of course like to see much more traction in this direction going forward. Key Message 3 – Rethinking human capital My third point relates to rethinking human capital. Despite growing awareness on the importance of sustainable business practices, in creating long term value and reducing risks, the challenges of building internal human capacity to support sustainable practices continues to be left largely unattended to.

Therefore, we should define ex-ante the exceptional circumstances under which the international community is ready to go beyond the normal lending limits. These conditions should include external debt sustainability, appropriate adjustment policy measures and the perspective of a quick return to financial markets. I also believe that exceptional procedures should be put in place when IMF access limits are to be breached. 4  BIS Review 62/2002  Second, procedures should be settled in order to limit the costs implied by unavoidable suspensions of payments. Indeed, these procedures should support the necessary informal dialogue between debtors and creditors prior to payment suspension and avoid the drawbacks of freezing market processes. Some instruments could help to achieve a timely and orderly process. A co-operative standstill mechanism would help to achieve a more timely and orderly rescheduling or restructuring process. For example, commonly agreed Guidelines or Best practices by debtors and creditors under the aegis of the IMF could ensure that such standstills be implemented. In addition to the appropriate domestic adjustment policy, such Guidelines could cover rules regarding, inter alia, transparency towards creditors, reasonable offers to creditors, comparable treatment of all creditors, seniority for “new money”, and a limited duration of the standstill. Obviously, a more extensive inclusion of collective action clauses (CACs) in debt contracts can greatly facilitate the negotiation of debt restructuring, by promoting agreement among creditors. Industrialised countries could contribute to this strategy by including CACs in their foreign debt issues, a step already made by EU countries.