Indeed, developing an integrated surveillance mechanism, identification and prevention of emerging risks in the Islamic financial system, as well as the establishment of an integrated crisis management and resolution framework, are crucial to the maintenance of financial stability in the global Islamic financial system. This would allow for a comprehensive and prompt response to a financial stress, and thus increase the prospects for an early recovery. This was the basis behind the setting up of the Islamic Financial Stability Forum (IFSF) in 2010, as a platform to build closer cooperation among regulatory authorities. More specifically, the IFSF carries the mandate of promoting international dialogue, engagement and cooperation in the area of financial stability. It also aims to broaden the understanding on the external repercussions of policy action or inaction in a given country on other national financial systems, and in considering the merits for collective action. Whilst effective international cooperation requires a framework for shared commitments, important in this process is the recognition of the remits of national autonomy given that financial regulation and intervention are subject to country-specific circumstances. This arrangement can contribute towards enhancing mutual understanding and prevent dilution of the commitment towards common objectives. 4  BIS central bankers’ speeches  A concrete advancement in cooperation and collaboration that has paved the way for the development of yet another important international financial infrastructure is the establishment of the International Islamic Liquidity Management Corporation (IILM), in 2010.

First, is its strength that is derived from the emphasis on having a close linkage between Islamic financial transactions and economic activity and from having built-in checks and balances which inherently make Islamic finance a stable form of intermediation. Second, are the initiatives that have been taken to strengthen the international infrastructure of Islamic finance to promote the sound and orderly development of Islamic finance. Importantly, these initiatives are being taken while the Islamic financial institutions and Islamic financial markets are still at a relatively early stage of development. BIS central bankers’ speeches  1  With its internationalization, Islamic finance will contribute to the more efficient mobilization and allocation of funds across regions. This trend will also strengthen the international financial and economic interlinkages between jurisdictions, bringing with it mutually reinforcing gains. It also influenced the patterns of global financial and economic integration, in particular, facilitating the revival of financial and economic integration between Asia and the Middle East and between emerging economies and the more established financial markets, thereby contributing towards a more balanced growth in the global economy. Initiatives to strengthen the cross-border financial stability framework As Islamic finance increasingly expands beyond national boundaries, it has called for developing the framework for cross-border financial stability to further strengthen the resilience of Islamic financial system and to address cross-border challenges in an integrated manner. This recent decade has seen such international cooperation and collaboration to safeguard financial stability in the international Islamic financial system be taken to a new level.