BIS central bankers’ speeches  3  As you will recall, in January this year a recommendation on dividend distribution policy was adopted in which banks were urged to keep conservative dividend distribution arrangements so as to preserve their solvency. This recommendation will be shortly reassessed. In turn, common criteria have been laid down for recurring decisions such as authorisations for the acquisition of qualifying holdings in credit institutions, assessment of fitness and properness of board members, or the requirements to be made in capital reductions and issuances. Finally, I must highlight the relevant role played by the SSM in the management of the Greek crisis. The SSM not only monitored the situation of the banks continuously, but, once agreement was reached between the European and Greek authorities last summer, it was entrusted with determining the recapitalisation requirements of Greece’s four significant institutions on the basis of a specific comprehensive assessment exercise, whose results were recently published. In the coming months, the SSM must ensure that the recapitalisation of these banks goes ahead as stipulated. 3. Some challenges  That said, and as I stated at the outset, the SSM has numerous challenges to face in the near future. I would like to mention four in particular. Firstly, the microprudential policy stance sought must be clearly defined. The SSM, despite its exemplary start-up, is still under construction and its criteria, practices and specific objectives have not yet reached the degree of stability desirable.

This recent decade has seen the rapid internationalisation of Islamic finance resulting in significant growth in cross border financial flows. The development of Islamic financial markets, in particular, the sukuk market, the progressive financial sector liberalisation, and the establishment of international arrangements and institutions to safeguard financial stability, cumulatively have contributed to enhance the international dimension of the industry. There are now more than 600 Islamic financial institutions operating in more than 75 countries. Given that Islamic financial transactions require an underlying economic transaction, it is a form of financial intermediation that is well anchored to serve the real economy. With its internationalisation, it has become an increasingly more important channel for the efficient allocation of financial resources across borders and for the diversification of risks. This new international dimension of Islamic finance has facilitated stronger financial ties between Asia and the Middle East. The sukuk market in particular has become an important avenue for international fund raising and investment activities that generate significant cross border flows. While the efforts to put in place these pre-conditions will continue, equally important is the role of the private sector in driving the Asian regional financial integration agenda, particularly in building the institutional capability to effectively intermediate funds in the region. While foreign presence throughout our region facilitates this process, it needs to be complemented by strong domestic regional intermediaries whose operations would be more inclusive and thus increase the potential for balanced growth in our region.