There are some different potential solutions. I have already observed that the market itself is often capable of solving the problems. This can be achieved, for instance, by customers making demands for information on various conflicts of interest. However, the collection and distribution of information is not free. And as information contains a strain of public goods, there is a risk that the market solution will generate too little information. It may therefore be necessary in certain contexts to have regulations stipulating that information on conflicts of interest must be made public. Regulations concerning greater insight into various persons’ incentives may limit the effects of different conflicts of interest. It would help outsiders to assess the quality of the information provided. A more drastic solution would be to require that activities exposed to conflicts of interest should be managed by different companies, or even different groups. The Glass Steagall Act in the United States, for instance, required that investment banks and commercial banks must be legally separated. However, there are clear disadvantages with forcing a separation of different activities through legislation. All regulation also entails costs - both explicit and implicit costs. It is important from society’s point of view that these costs do not exceed the usefulness of the regulation. One cost of separating various activities is that it makes it difficult, or impossible, for financial intermediaries to benefit from synergies and economies of scale.

For the countries in the ASEAN region, the partnership with the EU region has expanded steadily over time, and has continued to evolve and strengthen. There is significant potential to expand such trade and investment links between both the EU and ASEAN regions. Global corporations, including the EU and ASEAN multinational corporations (MNCs), have contributed to maximising the mutual benefits from such relationships. In Malaysia there are currently more than a thousand multinational corporations from more than 30 countries. Many are from the EU region. Initiatives that continue to lower the barriers between our respective regions are also set to strengthen the growth of such strategic partnerships. It is my pleasure to be here at this Quarterly Financial Panel Discussion, organised by the EU-Malaysia Chamber of Commerce and Industry, to speak on the role that Islamic finance might have on facilitating greater trade and investment between our regions. Islamic finance, which was previously domestic-centric, is now increasingly providing financial solutions for cross-border trade and investment. Progressive liberalisation has facilitated the internationalisation of Islamic finance. This has been reinforced by the dynamic pace of innovation in Islamic finance that has widened the range of financial products and services. Islamic finance has thus become an increasingly important channel for the efficient allocation of funds across borders and the diversification of risks. Islamic finance: financial solutions for international business Despite an increasingly more challenging environment, Islamic finance has continued to expand its potential as a sustainable and stable form of financial intermediation.