Although a delicate balancing act is required, I am confident that this is possible without imposing heavy reporting burdens or infringing too much on proprietary information of individual institutions. In this connection, the proposal by Germany for an international credit register is attractive. The register could collect information on the exposures of international financial intermediaries to single counterparties that have the potential to create systemic risk. For the public sector, the tasks include developing still higher standards for macroeconomic and financial data in emerging market economies, and promoting transparency in the reporting of their holdings of foreign reserves. Greater transparency in the operations of international financial institutions, such as the IMF, is also being pursued. The second approach involves designing an appropriate form of oversight of highly leveraged institutions. The Basle Committee’s report on Banks’ Interaction with Highly Leveraged Institutions recommends indirect regulation in which banks should adopt more prudent policies on the assessment, measurement and management of their exposure to highly leveraged institutions. Other tools of indirect regulation could include the imposition of capital charges on lending to such institutions, raising margin and collateral requirements, and so on. While such indirect regulation, through creditors, should clearly be supported, we need to satisfy ourselves that it is an adequate safeguard against the highly leveraged institutions causing the type of systemic problems in smaller markets when their activities overwhelm these markets. The third approach involves international co-operation to tackle regulatory arbitrage.

These include environmentally friendly and ethical product offerings. While international transactions are on the rise, Islamic finance players also need to introduce mutually acceptable and comprehensive Shariah compliant financial solutions that can serve differentiated market needs. The availability of diversified offerings can be tailored to the financial needs on a regional scale and serves as an important stimulus for expanding cross-border investments. Secondly, the need to have diverse and dynamic intermediaries and market participants including auxiliary service providers with a global focus. As the phase of globalisation expands, industry players from various sectors including Islamic banking, takaful and capital market including service providers need to further widen their outreach internationally in 2  BIS central bankers’ speeches  capitalising market opportunities. Towards meeting this prerequisite, businesses should forge partnership and strategic alliance to penetrate markets. Also of importance is the offering of multidisciplinary practices under one roof. For instance a consortium of service providers from legal and accounting disciplines with global linkages that enable seamless offering of clients’ services. To do so, a culture of knowledge sharing across borders and greater collaboration between the industry, regulators and the academia; including Shariah scholars need to be intensified to provide the linkages for effective knowledge building and informational flow. Thirdly, the need for business enablers, particularly in the areas of legislation, taxation and regulation that facilitate effective linkages and connections between global financial markets.