muhammad bin ibrahim : the polemics of governing law in islamic finance – recent developments and the way forward keynote address by mr muhammad bin ibrahim, deputy governor of the central bank of malaysia, at the international shariah research academy for islamic finance – institute of islamic banking and insurance ( isra - iibi ) 2nd annual international thematic workshop 2010 : “ the polemics of governing law in islamic finance ”, london, 29 november 2010. * * * let me first thank the organizers for inviting me to speak at this isra - iibi 2nd annual international thematic workshop 2010. although i very much regret not being able to be in london in person, i am thankful for the many advances of modern technology for the opportunity to briefly address all of you this morning. i am also happy to note that this event is a continuation of international collaboration between the organizers, the international shariah research academy for islamic finance ( isra ), the institute of islamic banking and insurance ( iibi ) and thomson reuters, following the success of the inaugural workshop held last year. the theme of this year ’ s workshop, “ the polemics of governing law in islamic finance : recent developments and the way forward ”, is most apt. with the emergence of islamic finance as a new growth area in the global financial landscape, this workshop provides an excellent forum to exchange views and information on topical legal issues in islamic finance. as islamic financial activities are increasingly crossing national boundaries, it is critical for more such dialogues to take place at an international level, in order to gain wider perspectives that can contribute to the development of a legal framework for islamic finance that is internationally facilitative. islamic finance today has become a major industry worldwide with over 300 institutions and an estimated asset size of more than usd1 trillion. its continuing advances in the international financial landscape have recently been accompanied by several major efforts aimed at strengthening its international financial infrastructure. a key structural enhancement achieved recently was the establishment of the islamic financial services forum ( ifsf ) that serves as a platform for cross - border engagement among regulators to achieve financial stability in the islamic financial system. another important development achieved more recently was the establishment of the international islamic liquidity management corporation ( iilm ) as a mechanism for more efficient management of liquidity across borders for islamic financial institutions. these continuing efforts to strengthen the foundations of islamic finance have served to ensure its preparedness in meeting the challenges on the path of internationalisation. as we open a new chapter of global growth and development with

active role in developing the secondary bond market in the 1990s as the sole market maker, and played a leading role in bond derivatives, inter alia to ensure continued net selling of government bonds in adverse market conditions. in the late 1990s, the bank reduced its involvement in the secondary market, which at the time was judged to be sufficiently mature. capital markets of course also play an important role in policy making, providing instantaneous feedback to policy makers on market expectations and perceptions of policy. such perceptions and expectations are reflected in bond and equity risk premia. having noted the benefits of well - developed financial systems, my remarks would be incomplete without at least briefly referring to the global financial crisis and how this may have changed the views of some on the positive impact of financial development and the role of markets. john lipsky, former imf first managing director, put it very well when he said that “ … much of this reassessment is natural and sensible. however, it is fair to say that the idea that financial markets are not perfectly self - regulating does not represent a novel insight. to the contrary, there are good reasons why they are regulated universally. ” in a nutshell, this highlights the importance of regulation and effective supervision in order to try and avoid a repeat of the global financial crises, which led to an economic and sovereign debt crisis, which after 6 years the world economy is still struggling to recover from. however, it is also important that regulation is appropriately calibrated, and that a defensible balance is struck between ensuring maximum benefit from capital markets through innovation on the one hand, and the need to protect markets bis central bankers ’ speeches and financial systems that may be still be in their infancy or not yet sufficiently developed on the other. particular care needs to be taken when formulating global regulatory standards that do not appropriately take account of country - specific circumstances and may have unintended consequences. let me now conclude by congratulating you on this important initiative, which will contribute to the further development of efficient and well - functioning capital markets in both countries, and also promote regular interaction between issuers, investors, brokers and others in the interest of growth and development. i wish you every success in your endeavours, and no doubt you will go from strength to strength in years to come. i thank you. bis central bankers ’ speeches