Allow me to highlight a few. 3  IMF – International Monetary Fund; FSF – Financial Stability Forum; BCBS – Basel Committee on Banking Supervision; IOSCO - International Organisation of Securities Commissions; IAIS - International Association of Insurance Supervisors. 2  BIS Review 147/2008  First, one of the most significant lessons about the crisis is also the most basic, that is, finance needs to return to its basic function of allocating scarce capital to the most productive uses, with the capital earning an appropriate risk-adjusted return. In this regard, the underlying Shariah precept in Islamic Finance of not using capital for speculation, but to build productive capacity and generate sustainable economic growth, takes on great relevance. By adhering to this basic precept, I am confident that Islamic Finance will assume a more prominent role in the coming years. Second, whatever the forms of intermediation, we must remain focused on the types and nature of risks, and how these risks are distributed among the players. Before this crisis, the main focus was on risks posed by hedge funds. As it turns out, a large part of the risks were sitting in the core banking system, in the form of off-balance sheet items held in SIVs. Mortgage lenders which originated subprime mortgages were outside the regulatory ambit. The main lesson here is that we have to examine risks holistically, across the value chain of activities and across different asset classes and markets, and not be blinkered in pre-judging where risks sit.

Today, the applications of Shariah precepts differ somewhat in certain areas. It will eventually be desirable to have some standardisation to enhance consistency and to remove one source of regulatory risk. However, our goal should be to achieve a gradual harmonisation of standards and approaches to regulation, rather than immediate convergence. Even in conventional finance, regulatory approaches and standards differ across different jurisdictions. A flexible, riskbased approach will also allow continued innovation to take place, while ensuring the resultant risks are appropriately managed. Second, we need to develop a wider range of tools to detect and mitigate risks. In conventional finance, work is underway in reviewing shortcomings in capital adequacy and liquidity management in the Basel II framework, as well as the provision of clearing and settlement infrastructure for derivatives. For Islamic Finance, we need to continue to develop instruments that help to mitigate risks. Bahrain’s initiative in developing the Liquidity Management Centre 7 is an excellent example of such an effort. In this regard, I am pleased to announce that the Monetary Authority of Singapore is now in the final stages of setting up a sukuk issuance facility. I had announced, at this May's Islamic  4  MoneySENSE is a national financial education program in Singapore covering three tiers of financial literacy – basic money management; financial planning; and investment know-how. Details on MoneySENSE are available at www.moneysense.gov.sg. 5  Murabaha-based asset financing refers to mark-up asset financing, commonly used in home financing and car financing.