Details on our proposal can be found on the website of the Bank for International Settlements, and the Committee has invited public comment on the approach through the end of this year. In recommending this revision, the Committee seeks to ensure that risk management systems distinguish between losses that can be anticipated versus those that cannot. Moreover, the new framework would include explicit incentives for banks to address each kind of loss appropriately ensuring strong incentives for banks to provision properly against expected losses. Since the proposal would require only modest revisions to the text of CP3 and would not alter the underlying system and data requirements for banks wishing to adopt an advanced approach to credit risk, we expect that the revised treatment will conform closely to the work that banks have already completed to prepare for implementation. The work plan to improve the framework discussed during our last meeting identified several areas in addition to this important EL-UL issue. We think that this work plan is perfectly compatible with the original time schedule to implement the New Accord by yearend 2006. Other issues ahead: complexity Beyond the “EL/UL” issue, the Committee has put at the top of its work plan for the next few months several other credit-risk related issues that emerged in consultations. Of these matters, I’d especially like to highlight three, namely complexity, conservatism, and competition. Certainly, the complexity of the proposals continues to draw the public’s attention.

The legislation also provides for the resolution of Islamic financial institutions to be in line with distinctive elements of the relevant Islamic contracts, thus improving the legal and procedural aspects for the orderly resolution of Islamic financial institutions. Another important area of priority is to achieve the further harmonization and mutual recognition of Shariah interpretations across jurisdictions. The progressive harmonization will be a major driving force for the internationalization of the Islamic financial system. The reduced uncertainty from differences in Shariah interpretations will also contribute to safeguarding financial stability. The continuous and constructive engagement amongst scholars, regulators and practitioners within and across the regions will pave the way for greater understanding and mutual respect for the Shariah views. This also needs to be supported by in-depth research and greater transparency on Shariah rulings and resolutions. The International Shari’ah Research Academy for Islamic Finance (ISRA), through its Shariah research undertakings and activities in promoting constant engagement among international scholars, has been at the forefront in driving progressive harmonization of Shariah at the regional and international levels. Its annually organized Muzakarah Cendekiawan Shari’ah Nusantara has emerged as an important platform for greater consensus to be forged among the Shariah scholars in the Nusantara. Finally, is the imperative for a robust liquidity management infrastructure for Islamic finance, both at the national and international levels. This is vital not only to ensure the resilience and stability of the Islamic financial system but also to reduce the cost of intermediation.