Zeti Akhtar Aziz: Further strengthening of the institutional structure for Islamic banking business operations Speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the launch of RHB Islamic Bank Berhad, Kuala Lumpur, 1 March 2005. *  *  *  "Building on the strong foundations of a well-developed, comprehensive Islamic financial system and strengthening its international inter-linkages and thus its global integration, has enhanced Malaysia's potential to be an international centre for Islamic finance. Our first Islamic bank, established in 1983, marked the beginning of the Islamic banking and finance chapter for our country. The opening of Islamic banking windows by financial institutions in 1993 paved the way for a more effective and efficient distribution channel for lslamic banking services to achieve the critical mass on a nationwide scale. These developments have been reinforced by the progress achieved in the establishment of the Islamic financial infrastructure, including the money and capital markets, the regulatory and supervisory structure, and most importantly, the legal and shariah framework. Today marks the emergence of a new era, with the establishment of an Islamic subsidiary of a banking group as Islamic banking in our financial system enters into the third strategic phase of the institutional development of Islamic banking and finance in Malaysia". Ladies and Gentlemen, It is my pleasure to be here this morning on the occasion of the official launch of RHB Islamic Bank Berhad. Indeed, today, we are witnessing the first transformation of an Islamic banking window to an Islamic subsidiary.

However, unlike regulations or supervisory standards, compliance with the best practice standards developed by our committees is not mandatory for the broader market. Furthermore, there may be instances where implementation may vary given the diversity of entities in the market and the different profiles of market engagement. This is particularly relevant for the global FX market, with its range of market participants. 21 Central banks play an important role in convening industry stakeholders to develop high standards of behavior that promote fairness and integrity, and in pushing the industry to affirm them. Nonetheless, central banks are not acting as regulators when they sponsor these committees, even when they have relevant regulatory powers. Since best practice standards that are articulated by the committees that we work with are not, in and of themselves, binding, promoting their adoption is both challenging and important. We work on a number of fronts in this effort. We strive to engage a wide diversity  18  See “The Introduction of the TMPG Fails Charge for U.S. Treasury Securities” for more information. 19  The New York Fed has organized workshops and conferences on reforming culture in the financial services industry. Additionally, several executives have spoken publicly on the topic. See here for more detail. 20  The G30, the Basel Committee, the European Systemic Risk Board, and the FSB have issued papers on culture, governance, and misconduct risk. The Bank of England’s Fair and Effective Markets Review called for higher conduct standards for the fixed income markets.