The recent financial upheavals offers the most striking evidence given that there was no disruption to the financial intermediation process, credit flows and transmission mechanism. There are, of course, pockets of risks in individual countries, inflation and property market bubble, to name a few, where different policy instruments could be used. Central to managing these challenges are macro-prudential tools, which have been deployed by Asian countries, to prevent, amongst others, price inflation in the real estate sector. A number of Asian policymakers recently had tightened lending standards by lowering loan-to-value ratio, imposing limits on non-owner-occupied property purchases and increasing transaction costs, as pre-emptive measures to temper speculative property investments and to manage or prevent excessive build-ups in household debt, at a time of fairly low interest rates and abundance of liquidity. At the regional level, safeguards have also been enhanced. Among the lessons drawn from the 1997–98 Asian financial crisis are the importance of early detection of cross-border risks and vulnerabilities, followed by a collectively cohesive and firm action to avert any potential crisis. Over the years, the region has developed an integrated surveillance and crisis management framework through various groupings such as the Executive Meeting of East Asia Pacific (EMEAP) members and the South East Asian Central Banks. For example, the EMEAP surveillance framework focuses closely on regional monetary and financial systems which also connect international financial institutions and member central banks’ reserves management and money market teams through the Dealing Room Network.

The most recent significant development was the establishment of International Islamic Liquidity Management Corporation in Kuala Lumpur. This corporation will act as a conduit to issue highly rated short-term  4  BIS Review 162/2010  Islamic instruments to enhance cross-border liquidity management and provide Islamic financial institutions with an additional avenue to manage their short-term liquidity. Complemented by other initiatives under the “Malaysian as an Islamic Financial Centre”, I am quite confident that Islamic financial markets in Malaysia, for both ringgit and foreign currency, is set to thrive in the coming years. Recently, we have allocated a small portion of funds to be disbursed to prospective and existing Islamic Fund Management Companies to invest primarily in foreign currency sukuk. This will provide a platform for fledgling fund managers to build track records and spur their growth of asset under management, besides broadening the sukuk market in Malaysia. In parallel, this initiative is also expected to catalyse the development of end-to-end value chain capabilities, encompassing the areas of secondary market trading and supporting infrastructures. Conclusion I would like to end my remarks by concluding that in the current global economic environment, uncertainties loom large and we have to be mindful of the challenges ahead, either as an investor or policymaker. This conference is indeed very timely to encourage open discussions on key themes in global investing, and hopefully we can all gain new insights in managing the exciting and challenging times ahead. Thank you for your kind attention. BIS Review 162/2010  5