Authorities have started exploring and analysing potential issues with the granularity and consistency of global standards, and will continue to do so in the coming months. For instance, CPMI-IOSCO has put in place a substantial implementation monitoring programme of the PFMI across jurisdictions:8 the monitoring work so far has shown that many jurisdictions have made good progress in adopting the PFMI in their domestic regulatory frameworks. A more detailed analysis of whether the content and the outcome of implementing legislation, regulations and policies are complete and consistent is currently under way. Furthermore, the granularity of margin practices is being reviewed, and CPMI-IOSCO is now assessing – in cooperation with the industry – the consistency of CCP stress testing practices.9 Consistency does not need to be achieved by imposing standardised models on all CCPs – a “one size fits all” approach may not be appropriate, and regulators may be more effective by relying instead on minimum standards, which all CCPs would be required to apply to their models. The outcome of these exercises will be of crucial importance in identifying and calibrating the need for further regulatory action. Staying clear of pitfalls and misconceptions. If gaps were to be identified in CCP risk management standards, requiring the adoption of new global requirements, we would need to make sure the debate is being framed in an appropriate manner. First of all, there may be no single best solution for addressing concerns related to CCP safety.

This is derived from the Shariah principles, the key pillar of Islamic finance. The Shariah injunctions require that Islamic financial transactions be accompanied by an underlying productive activity resulting in a close link between financial and productive flows. Under the risk sharing concept, there is an explicit risk sharing by the financier and the customer. In this arrangement, the real activity is expected to generate sufficient wealth to compensate for the risks. Parties to the transactions would thus be insulated from excessive risks exposure given that the Shariah prohibits the excess leverage and involvement in speculative financial activities. The intrinsic principle of profit and risk sharing thus provides an in-built check and balance to the Islamic financial transactions. A combination of these distinct features together with the implementation of prudential risk management standards and practices would contribute to the robustness and resilience of Islamic financial system. Mutual respect on Shariah matters This decade has thus been a phase of innovation in the global Islamic financial system with a number of breakthroughs and major milestones in innovative deals and structures. The advancement of sukuk, Islamic securitization, Islamic private equity, Islamic real estate investment fund and other financial instruments in terms of sophistication and product range has widened the international market reach of Islamic finance, particularly in the cross border transactions. At the same time, this phase is also seeing a number of key issues being raised, particularly in respect of divergence of Shariah views underlying a number of the Islamic financial transactions.