The increased focus on financial stability has several implications for the new financial landscape. The most significant will be the fundamental changes in the regulatory environment. These include changes to institutional arrangements for oversight of the financial system – both at the international level and within national borders in a number of countries, significantly strengthened prudential standards with a focus on building stronger capital and liquidity buffers, increased transparency in financial transactions and exposures, and enhanced options to resolve failed financial institutions. Much progress has already been made by the Islamic Financial Services Board in promulgating an extensive set of prudential standards for the Islamic financial services industry since its establishment in 2002. The IFSB has already introduced standards for capital adequacy, risk management, corporate governance and Shariah governance. This important work has been significant in promoting international uniformity of the regulatory  BIS central bankers’ speeches  3  framework and international best practices for the Islamic financial system in different jurisdictions. The IFSB has also established a facilitative platform to promote overall financial stability through the Islamic Financial Stability Forum (IFSF) that serves as an avenue for cross-border engagement amongst regulators. The important goal of strengthening the foundation of the global Islamic financial system has also been reinforced further following the recent global financial crisis, through the work of the IFSB-IDB Task Force of Islamic Finance and Global Financial Stability. In its report that was released in 2010, eight building blocks were identified to manage potential risks and vulnerabilities to the Islamic system.

With considerable capacity to meet large investment requirements, opportunities therein lie in the more effective and efficient channelling of the  2  BIS central bankers’ speeches  sizeable surplus funds towards the vast productive investment opportunities within and across the emerging economies. These trends are being reinforced by the rapid expansion of financial institutions in emerging economies that have ventured beyond national borders. Financial institutions from the emerging economies have grown significantly in size and strength in this recent decade to now account for almost half of worldwide financial industry market value. Eight out of the twenty largest global banks, including the top two, are emerging market financial institutions. As the emerging market financial institutions continue to regionalise and internationalise, their role and importance can be expected to further expand. Another key development is the integration of financial markets amongst emerging economies, driven in part by the increased economic inter-linkages and the increased liberalisation trend in the financial sector. The rapid internationalisation of Islamic finance is reinforcing this trend and has enhanced the economic and financial connectivity between the emerging economies. The high level of savings and wealth accumulation in several of the emerging economies, including in Asia and the Middle East, need to be effectively channelled towards productive investments including for large infrastructure development. In this environment, Islamic finance has emerged as a viable and attractive form of intermediation including financing of large scale infrastructure projects.