In addition, robust financial models that leverage on the advances in information technology can be used to enhance product development and risk management. BIS Review 49/2005  3  Ninth, the development of the financial market infrastructure is equally important to ensure the sustainability of Islamic banking. The Islamic interbank and foreign exchange markets are integral to the efficient functioning of the Islamic banking system. They facilitate the liquidity operations of Islamic banks and promote financial stability. In addition, they serve as an important transmission channel for the implementation of monetary policy as well as the central bank's role as lender of last resort. The creation of a well-developed Islamic capital market is also important as it provides the users of capital with an alternative and cost-efficient source of longer-term financing, and accords investors with a wider range of financial instruments to suit their different risk profiles. And at the core of any financial system lies an efficient and robust payment system for the clearing and settlement of payments. Other financial infrastructure that provides support to the development of the Islamic banking sector includes the mortgage corporation to undertake the securitisation of house financing, a credit guarantee corporation to provide guarantee schemes to the SME industry, and a rating agency to rate the Islamic financial instruments and a deposit insurance scheme to provide the necessary safety net for depositors should also be developed. In addition, the auditing, tax and legal firms must have the right talents to provide their services to the Islamic financial institutions.

In addition, a legal fraternity that is competent in both Shariah and civil laws is also important. Finally, in a dual banking system, the tax legislation should accord neutrality in treatment between Islamic and conventional banking products. Sixth, the development of a comprehensive Shariah framework is a fundamental part of the process. Each institution offering Islamic products will need to establish a Shariah advisory committee to ensure that all Islamic transactions, products and operations are Shariah-compliant. Shariah decisions need to be made transparent to promote greater understanding and the acceptance of such decisions. Seventh, the importance of a robust and effective regulatory and supervisory framework cannot be over-emphasised. While the financial regulation and supervision of Islamic banking institutions would be similar, the areas such as capital adequacy, the liquidity framework have to take into account the unique risk characteristics of the Islamic banking models that accord the Shariah requirements. Sound corporate governance, transparency, accountability, disclosure, market discipline, risk management and consumer protection are common issues that need to be addressed. In a dual banking system, it is important that opportunities for regulatory arbitrage in banking practices should be eliminated. Eighth, research and development is important to incorporate core Islamic values into banking products and business models. Research and development, and leveraging on the advances in information and communication technology are also critical in ensuring performance and a more equitable distribution of profits and wealth among all stakeholders.