In this regard, the IFSB has already made progress in developing the prudential standards on the capital adequacy and risk management framework, and has commenced work on developing standards on corporate governance. Appropriate accounting standards have also been put in place to reflect the true and fair value of banking operations that would lead to greater accountability and responsibility on the part of financial institutions. While the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) has made a significant contribution in formulating and issuing accounting and auditing standards for Islamic financial institutions, efforts need to be intensified to promote of the adoption of these standards. The International Islamic Financial Market (IIFM) further provides the environment that will encourage active participation by both Islamic and non-Islamic financial institutions in the secondary market for Islamic financial instruments. Several global sovereign sukuks have been issued in the international market that has attracted wide interest, both by Muslim and non-Muslim investors. The next phase in this development is the raising of funds from this market by multinational corporations and multilateral institutions. As the volume increases, it would strengthen the inter-linkages and integration amongst the Islamic financial centres. In addition to structuring a variety of attractive off-the-shelf instruments, efforts need to be intensified to create a benchmark curve for future issues. With a well-developed system, the trading of instruments would encourage the free flow of capital movements and would in turn facilitate greater Islamic fund management activities.

Zeti Akhtar Aziz: Towards creating an Islamic Financial System as an integral part of the International Financial System - strategies and challenges Speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Asian Islamic Banking & Finance Summit, Kuala Lumpur, 21 September 2004. *  *  *  “The integration of Islamic finance with international financial markets and institutions has demonstrated its viability, competitiveness, resilience and sustainability as a form of financial intermediation. This trend has contributed towards facilitating greater cross border flows in terms of increased trade and investment transactions thereby strengthening the global economic and financial linkages. As this international integration process intensifies, it not only raises the prospects for more balanced global growth but also allows for greater diversification of risks thus contributing towards greater global stability. At the core of this financial globalisation process is the robustness and resilience of the domestic Islamic financial system. The development of a sustainable Islamic financial system that is able to withstand the challenges of the uncertainties and instabilities inherent in the global financial system, thus not only requires an effective global financial architecture but a system that is also supported by an appropriate, comprehensive and sound domestic financial infrastructure. These mutually reinforcing structures would not only accentuate wealth creation and foster greater potential for trade but would also promote global financial stability and breakthroughs in new business relationships”.