Moreover, in a particular country, even if its economic fundamentals look good, such a situation can give rise to downward pressure on both the BIS Review 81/1998  -5exchange rate and share prices at the same time as interest rates rise. That suggests that certain investors are reducing all types of holding in the country in question, which is a signal to the country’s decisionmakers that more must be done to enhance general economic policy’s credibility. High standard of discipline throughout economic policy While it is obviously important to discuss how a financial crisis, if it occurs, should be managed, it is at least as important to minimise the risks of a crisis ever materialising. This applies in particular when the financial system is undergoing rapid developments. The transformation in Europe in the coming years must therefore be followed closely. One key factor is economic policy in general. An economy characterised by low, stable inflation, sound government finances and good economic policy credibility also provides a generally stable economic environment. This in turn promotes a sound development of the financial domain. By itself, however, this is not enough. Another highly important matter is the appropriate government supervision of the financial sector. Even central banks that are not directly engaged in this supervision must monitor tendencies in the financial field in order to fulfil their primary tasks of ensuring price stability and financial system stability. There are several reasons for this. Monetary policy is implemented through the financial system’s agents.

Indeed, developing an integrated surveillance mechanism, identification and prevention of emerging risks in the Islamic financial system, as well as the establishment of an integrated crisis management and resolution framework, are crucial to the maintenance of financial stability in the global Islamic financial system. This would allow for a comprehensive and prompt response to a financial stress, and thus increase the prospects for an early recovery. This was the basis behind the setting up of the Islamic Financial Stability Forum (IFSF) in 2010, as a platform to build closer cooperation among regulatory authorities. More specifically, the IFSF carries the mandate of promoting international dialogue, engagement and cooperation in the area of financial stability. It also aims to broaden the understanding on the external repercussions of policy action or inaction in a given country on other national financial systems, and in considering the merits for collective action. Whilst effective international cooperation requires a framework for shared commitments, important in this process is the recognition of the remits of national autonomy given that financial regulation and intervention are subject to country-specific circumstances. This arrangement can contribute towards enhancing mutual understanding and prevent dilution of the commitment towards common objectives. 4  BIS central bankers’ speeches  A concrete advancement in cooperation and collaboration that has paved the way for the development of yet another important international financial infrastructure is the establishment of the International Islamic Liquidity Management Corporation (IILM), in 2010.