But it was hard to join the two views together. Bringing CHAPS into the Bank meant a single organisation could take a holistic approach to managing risk across the end-to-end CHAPS system. It also meant we could draw on a wide range of skills within the Bank – from supervision to cyber. This change enabled the teams responsible for operation of CHAPS to work closely with colleagues in the PRA, who are responsible for supervising most of our participants, and to access a range of information and tools to effectively challenge risk management practices in our users. Another area of the Bank, responsible to a different Deputy Governor, continues to supervise CHAPS to the same standards as other systemically important FMIs. As a single unified operator for CHAPS, as well as RTGS, the Bank is taking important steps as a standard setter and a thought leader to drive increased resilience and improved recovery capability in payments. Minimising risk  Standards  As the operator of CHAPS, the Bank is well placed to drive greater resilience in members of CHAPS through the setting of standards. This is complemented by the Bank’s role as prudential regulator of many of these firms. In order to manage risk, a payment system has rules to govern who can join, how participants should behave, and what operational and technical requirements they must meet. The CHAPS Reference Manual (CRM)7 contains the rules and requirements that CHAPS Direct Participants must comply with.

This recent decade has seen the rapid internationalisation of Islamic finance resulting in significant growth in cross border financial flows. The development of Islamic financial markets, in particular, the sukuk market, the progressive financial sector liberalisation, and the establishment of international arrangements and institutions to safeguard financial stability, cumulatively have contributed to enhance the international dimension of the industry. There are now more than 600 Islamic financial institutions operating in more than 75 countries. Given that Islamic financial transactions require an underlying economic transaction, it is a form of financial intermediation that is well anchored to serve the real economy. With its internationalisation, it has become an increasingly more important channel for the efficient allocation of financial resources across borders and for the diversification of risks. This new international dimension of Islamic finance has facilitated stronger financial ties between Asia and the Middle East. The sukuk market in particular has become an important avenue for international fund raising and investment activities that generate significant cross border flows. While the efforts to put in place these pre-conditions will continue, equally important is the role of the private sector in driving the Asian regional financial integration agenda, particularly in building the institutional capability to effectively intermediate funds in the region. While foreign presence throughout our region facilitates this process, it needs to be complemented by strong domestic regional intermediaries whose operations would be more inclusive and thus increase the potential for balanced growth in our region.