The broader concept of the “home market” should be developed further. One of the challenges will be to ensure strong competition in retail markets so that the benefits of integration could be felt by consumers across the region. Fostering sustainable growth in the region requires us to take a systemic view when designing harmonized regulation for the financial sector, and this is where the quality and proactivity of macro-prudential supervision becomes so important. The Nordic-Baltic dimension adds two nuances to the design of macro-prudential policies. First, our own experience of the past decade was a stark reminder of the particular challenges of managing capital flows in highly integrated economies and financial sectors. Second, most of the large Nordic banking groups have been considered as too big to fail in almost all countries in the region. BIS central bankers’ speeches  1  Diversity in the financial sector structures is a challenge for cross-border cooperation As I said earlier, the economies and financial sectors of the Nordic-Baltic region are diverse as well as closely integrated. Different countries in the region have opted for different policy frameworks; the structure of the financial sector also differs by country. It turns out that in a region of only eight countries, some of which are very small, one needs to tackle very much the same array of problems that make the coordination of financial sector policy and supervision so challenging in Europe. There are home and host countries; there are non-EU member states, EU member states, and euro area member states.

This will not only provide an extensive pool of highly trained and capable expertise to spearhead future development, but will also promote greater innovation in Islamic financial products and services. Given the functioning of Islamic finance in parallel with the conventional financial system in our financial environment, neutrality in treatment between Islamic and conventional finance products is important to ensure its viability and sustainability. This competitive environment would in fact encourage greater innovation to take place, thereby supporting the development of the Islamic financial services industry. With the much strengthened and more robust Islamic financial infrastructure that is now firmly in place, the Islamic financial services industry is well positioned to tap new growth opportunities to realize its full potential. This will inevitably increase the breadth and depth of the Islamic financial markets and, more importantly, strengthen Malaysia 's position as an attractive and dynamic international Islamic financial centre. The Bank's regulatory orientation in this changing environment continues to evolve towards a more robust and flexible regime to effectively maintain financial stability. The regulation of the financial services industry in the changing environment will continue to focus on safeguarding the financial system against systemic risk, ensuring the reasonable protection of consumers in financial service dealings and enhancing the efficiency of the financial system. In addition, the regulatory function will also continue to facilitate the achievement of the socio-economic objectives, including increasing the  2  BIS Review 76/2006  insurance penetration, promoting adequate provision for retirement needs and supporting the growth of target sectors.