Technical cooperation programmes can be developed and designed for both ex-ante and ex-post implementation of the IFSB standards. In the pre-implementation period, structured technical programmes can be tailored to individual countries to enhance jurisdictional preparedness in adopting the standards if so required. Similarly in the post-implementation period, a framework for selfassessment can be developed to assess jurisdictional effectiveness in implementing the IFSB standards. These developments would potentially lead to the inclusion of the IFSB standards and rules for adherence and implementation across jurisdictions, along with the core principles and standards of the Basel Committee, IAIS and IOSCO within the context of the IMF-World Bank Financial Sector Assessment Program. This would further contribute towards the efforts of achieving global financial stability in the international financial system. Cross-border supervisory cooperation The increasing internationalisation of Islamic finance has a significant extent been facilitated by the expansion of the operations of Islamic financial institutions beyond their domestic borders, motivated by the search for new growth opportunities. In addition to the increased interconnectedness of Islamic financial markets, this trend calls for greater cooperation among supervisors to ensure financial stability of the Islamic financial system. The recent global financial crisis has in fact put to a test the strength of cross border supervisory cooperation. Challenged by information asymmetries due in part to the lack of arrangements for cooperation, supervisors faced the challenging task of understanding the extent of the systemic risk and its contagion across borders.

The UK economy entered the crisis with too much debt in banking, in the household sector, in government and, for the nation as a whole, externally. And the UK entered the crisis with the composition of demand imbalanced – too much public and private consumption, too little net trade. Indeed, aggregate demand had been unbalanced for so long that the economy’s productive capacity was (and probably still is) unbalanced, investment in capital having followed the pattern of demand. For prosperity to be put on a secure footing for the longer term, adjustment is still needed. With one vital exception, engineering structural change in the economy is not the responsibility of the central bank. The exception of course is the safety and soundness of the banking system, which is a precondition for broader monetary stability. An undercapitalised banking system would not be able smoothly to supply sufficient credit to aid recovery as demand picks up, enabling investment in innovations and efficiency. Nor has it been able to do so as much as needed to help capital shift to firms and sectors that are beneficiaries of the new pattern of global and domestic demand. In my view, that may explain some of the weaknesses in productivity growth.9 The Financial Policy Committee required recapitalisation of the UK’s big banks and building societies not simply because that is needed to underpin stability, which it is, but also because a resilient banking system is a precondition for sustained and better balanced recovery.