Mr Lee examines issues relating to the changing financial landscape  Keynote address by Mr Lee Hsien Loong, Chairman of the Board of Directors of The Monetary Authority of Singapore and Deputy Prime Minister, at the 16th General Meeting of the Asian Bankers Association, held in Singapore on 26 November 1999. Introduction The international financial landscape is changing rapidly. In Asia, economies and financial systems have undergone a traumatic two years. Weakening economies uncovered flaws in financial institutions and supervision. Entire financial systems went down, undermined by slack lending practices and inadequate legal frameworks. The financial troubles in turn affected the real sector, sending economies into steep decline. Now the crisis is passing. In many countries, macro indicators have stabilised, and growth has resumed. But it will take years of hard work to clean up the bad loans, recapitalise the banks, strengthen the legal and supervisory framework, change long established cosy relationships, and put long-term growth on a firmer foundation. While Asia has been preoccupied with reconstruction and recovery, globalisation and technology have progressed apace, especially in the US and Europe. Technology is both a critical cause and a catalyst. Financial arenas are becoming more open, new products and services are being invented and marketed, and regulators everywhere are scrambling to assess the changes and master the flux. An international wave of mergers and acquisitions has swept the industry, as boundaries between financial sectors and products have blurred dramatically.

A decade on, the work of the IFSB in ensuring a cohesive cross-border regulatory framework and the international best practices that are attuned to the intrinsic characteristics and peculiarities of Islamic financial intermediation, have served to underpin the development of a sound and stable Islamic financial system, ushering in a phase of rapid growth and greater internationalization of the industry. Indeed, 10 years since the founding of the IFSB have been a period of significance, during which the Islamic financial services industry has grown impressively with its landscape dramatically evolved. This growth acceleration has been accompanied by the widening of its geographical reach transcending its traditional borders in Muslim majority countries to the more established financial centres. In addition, Islamic finance has evolved as a comprehensive system of intermediation servicing all segments of society, including governments, businesses and households regardless of scale of businesses and income levels. In this decade, Islamic finance has also evolved from being domestic-centric to become increasingly internationalized, intermediating funds across borders and becoming a new vehicle that bridges economies and fostering closer financial linkages, particularly among emerging and developing markets. As a form of financial intermediation that is well anchored to serve the real economy, Islamic finance offers distinct potential to achieve the goals of inclusive growth and financial stability. Its foundations have been strengthened with the setting up of the IFSB and before that, the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), have taken the lead in setting the prudential and accounting standards for the industry.