National and industry players have to work closely together to address the many challenges faced by Islamic finance as it internationalizes into new markets. This morning, let me touch on just three issues, which I am sure you will be discussing in greater depth during the course of the conference. 11. First, there is a fundamental need for further standardization and harmonization of both regulatory and Shariah standards across the Middle East and Asia. The greater use of standardized legal documentation will increase efficiency, certainty, transparency and liquidity. This would allow for easier cross-border offering of financial products that would reach a wider investor base and thereby bring about greater economies of scale and reduce transaction costs. Standardisation will also enable better risk management by ensuring that risks are clearly identified and appropriately mitigated between financial institutions and their  4  Asian Development Bank, Asian Development Outlook 2011 (April 2011). 5  Economist Intelligence Unit, “GCC trade and investment flows: The emerging-market surge”, 2011. 2  BIS central bankers’ speeches  counterparties. Shariah scholars and multilateral agencies such as the IDB, Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and Islamic Financial Services Board (IFSB) are already working to address these critical issues. As a member of the IFSB, the Monetary Authority of Singapore (MAS) will work with them in their efforts to allow greater access to an even larger global community, including non-Muslim countries. 12.

The annual growth rate of M1 increased to 2.0% in September, from 1.7% in August. On the counterpart side, the annual growth rate of loans to non-financial corporations and to households in September, adjusted for loan sales and securitisation, remained broadly unchanged compared with August, at 2.2% and 2.6% respectively. These figures do not signal that the heightened financial market tensions have affected the supply of credit up to September. However, as such effects can manifest themselves with lags, close scrutiny of credit developments is warranted in the period ahead. Taking the appropriate medium-term perspective and looking through short-term volatility, underlying broad money and loan growth have stabilised over recent months. Overall, the underlying pace of monetary expansion thus remains moderate. The overall size of monetary financial institutions’ balance sheets remained broadly unchanged over the past few months. The soundness of bank balance sheets will be a key factor in reducing potential negative feedback loop effects related to tensions in financial markets, thereby facilitating an appropriate provision of credit to the economy over time. We therefore welcome the agreement of the European Council to proceed with the increase in the capital position of banks to 9% of core Tier 1 by the end of June 2012. We also fully support the call to national supervisors to ensure that banks’ recapitalisation plans do not lead to excessive deleveraging. To sum up, based on its regular economic and monetary analyses, the Governing Council decided to reduce the key ECB interest rates by 25 basis points.