Mohd Razif bin Abd Kadir: Islamic finance and the collaboration between Malaysia and Bahrain Special remarks by Mr Mohd Razif bin Abd Kadir, Deputy Governor of the Central Bank of Malaysia, at the Signing Ceremony of Memorandum of Understanding between Bursa Malaysia – Bahrain Financial Exchange, Manama, 24 January 2010. *  *  *  It is my great pleasure to be here today on this occasion of the signing ceremony of the Memorandum of Understanding between Bursa Malaysia Berhad and the Bahrain Financial Exchange. The signing we are about to witness today will lay the foundation for the collaboration by the two exchanges on Bursa Suq Al-Sila’. I wish to thank the two exchanges for inviting me to give some remarks at this auspicious occasion. I also wish to applaud this commendable effort by the two exchanges which marks another important milestone in the development of the global Islamic financial services industry and in bridging further our two countries. Maintaining the stability of Islamic financial system This effort takes place at a time when the global economy is entering into a period of improved international economic and financial conditions. The global financial crisis has highlighted several structural weaknesses and drawbacks in the international financial system. While Islamic finance is not insulated from the effects of the current environment, the Shariah principles and values that are inherent in Islamic finance provide an important underlying foundation. The Islamic financial system has continued, during this period, to become increasingly integrated with the international financial system.

Leveraging on the experience of Bursa Malaysia in the area of exchange traded products, this platform is able to eliminate uncertainty in the transactions and could mitigate risks such as legal risk, market risk and counter-party risk. As Bursa Suq Al-Sila’ is designed to be a multi-currency platform, it can enhance liquidity and risk management capacity of the international Islamic banking community. Furthermore, it could be harnessed into a cost effective global platform to develop universally acceptable Islamic financial products for the financial and capital market. Overtime, in making it into a truly multi-commodity global exchange, the scope of the exchange-traded product offerings could be expanded to include other commodities and the level of participation should be expanded to include players from outside the financial services industry as well. The proposed collaboration between the Bahrain Financial Exchange and Bursa Malaysia is expected to strengthen cross border financial traffic between both our markets, as this platform has a vast potential to facilitate liquidity flows from one financial centre to another. It will also pave the way for optimisation of financial resources across borders as well as diversification of risks between our markets. Furthermore, this venture will also allow both our markets to explore various opportunities for further collaboration in the future, leveraging on each other’s strengths and achieve synergies for effective and efficient Islamic financial services industry. I urge the banks in Bahrain and Malaysia to work together and use Bursa Suq Al-Sila’ to enable the flows of funds that would enhance the liquidity management framework.