The recent financial crisis has also revealed the failure to understand the inter-relationship between financial and the broader sector, particularly in understanding the potential spill-over and second-round effects that are transmitted between sectors. Post-crisis regulatory efforts have focused on macro-prudential measures to complement micro-surveillance and supervision. This entails horizontal assessment of risks across institutions, sectors and national borders, as well as risks in asset markets across time. This is particularly relevant for the Islamic financial services sector. Given the close ties of Islamic finance with the real economic sector through the various modes of Islamic financing contracts, a complete understanding of the entire risk spectrum often encounters much difficulties. It is therefore important for the regulators to also establish an integrated framework of macro surveillance for Islamic financial activities across jurisdictions. The global database for prudential Islamic finance statistics to be initiated by the IFSB, would therefore need to go far beyond ensuring standardised data collection among jurisdictions, but also to enable the generation of various macro and financial indicators, and global sharing of best practices in macro surveillance. The engagement by supervisors would also contribute towards the understanding of the systemic risk and its origins and would support the maintenance of timely and accurate economic and financial data. This would in turn contribute towards more effective surveillance and management of financial stability issues.

This landmark collaboration between 12 central banks and two multilateral development institutions represents a major breakthrough in strengthening the liquidity arrangements for the international Islamic financial system. This liquidity infrastructure is vital for the efficient and well-functioning of the Islamic financial system. The creation of IILM with the mandate to issue Shariah compliant liquid instruments is an important step forward in promoting more efficient cross-border liquidity management by Islamic financial institutions. The IILM will also be well-equipped to serve as a platform of global engagement on liquidity management in the Islamic financial system and on addressing cross-border systemic liquidity issues. Conclusion Let me conclude my remarks. This decade has been a defining era in the evolution of Islamic finance. It has been characterized by rapid global expansion and increased internationalisation. Of importance is that these trends have been supported by significant actions taken to strengthen the foundations of the international Islamic financial system involving the development of important international institutional arrangements and mechanisms. These tremendous achievements have been the outcome of strong cooperation and collaboration among the Central Banking community from both Islamic and non-Islamic countries. Moving forward, it is essential for this strong cooperation to continue given the dynamic nature of the industry. In addition, the pace of internationalization can be expected to gain further momentum. As the international integration of Islamic finance intensifies, cross border financial flows and its associated challenges will also increase. This will call for an even greater degree of international cooperation and coordination.