In the discussion over the correct relation of economic policy to the bubbles building up on the asset market, there is a dominant conviction that the supervisory policy is a much better response. For this very reason, supervision over financial markets should be independent of politicians, as it may turn out necessary to take up actions aimed at limiting the rate of building up of the speculative bubble at a time when it is not convenient for politicians, considering the elections cycle. New challenges for regulators/supervisors Globalization of financial markets changes the operation conditions of financial institutions by opening new development opportunities for them, but also by creating new types of risk for the stability of the financial systems. Globalization creates new opportunities in the area of risk management, including but not limited to the most important banking risk, i.e. the credit risk. Development of new risk transfer instruments (credit derivatives and securitisation) and increase in the number of their purchasers enable more effective use of banks’ capital. New instruments, however, pose some threats. 40 Both market participants and markets supervisors indicate the issues of progressive complexity of derivatives, and difficulties in complete understanding and estimating the risk related thereto. 41 Difficulty in evaluating risk flow directions and lack of basic data on some unregulated financial institutions, which are becoming increasingly active on the derivatives market, are also a problem. What I mean here are in particular the hedge funds, which manage increasing funds.

The upcoming debut sovereign issuances from established financial centres and emerging markets and the increasing diversity of the composition of sukuk investors across continents, in addition to the growing trend for multi-currency sukuk issuances, cumulatively contribute towards strengthening the dynamism of the sukuk as a global product for fund raising and investment activities in the international financial markets. Malaysia, has witnessed an increasing trend of issuances of foreign currency denominated sukuk in our domestic sukuk market, reinforced by an increasingly wider investor base as reflected by the increased and more diversified foreign investor participation in such issuances. In parallel with this rapid growth of cross-border financial flows has been the increased attention to the development of the international financial architecture relating to financial stability in the Islamic financial system. With the important two international institutions already well established, that is, the accounting standards setting organisation, AAOIFI, and the prudential standard setting body, the IFSB, concerted global efforts have been directed towards the progressive implementation of the recommendations in the eight building blocks identified in the Islamic Finance and Global Financial Stability Report 2010. In particular, the efforts have been focused on the adoption and operationalisation of the prudential standards and the development of the potential for effective liquidity management as part of the efforts to safeguard financial stability. It is encouraging that there has been a higher adoption of the prudential standards issued by the IFSB, with implementation by 13 regulatory and supervisory authorities worldwide with indications that there are more in the pipeline.