of interests between the countries. there are elements of similar problems in the nordea case, too. however, here the problem is rather the opposite – namely that the bank group ’ s different companies ( parent and subsidiaries ) would be covered by supervision in several countries. the fact that each cross - border bank group has to obey and report to several supervisory authorities leads to additional costs and administrative duties for the bank. this is an obstacle to continued integration and to the competitiveness of the european bank market. another problem is that there are no common arrangements for crisis management within the eu. basically the only ec regulations defining how responsibility should be divided between the countries in the event of a cross - border crisis are regulations for compensating depositors in the case of bank failures. however, these regulations are not primarily intended to ensure efficient crisis management. they should rather be seen as protection for consumers. the fact that the allocation of responsibility between countries in the event of cross - border crises is in principle unregulated leads to at least two serious problems. firstly, it lays the foundation for the conflict of interests i just described. even if the responsibility for crisis management is formally unregulated, it will unavoidably fall to the country whose economy is to a large degree dependent on the bank that is in distress. this country is not necessarily the same country that has the responsibility for supervision of the bank. one consequence could thus be that a country which is substantially influenced by foreign banks could be forced to pay the bill for unsatisfactory supervision exercised by another country. the lack of a formal link between responsibility for supervision and crisis management is in this case an evident problem. secondly, the unregulated allocation of responsibility for crisis management means that each country that is involved in a cross - border crisis is thrown upon its own national crisis management and on the goodwill of the other affected countries in contributing to efficient crisis management. it is far from certain that this will lead to the optimal solutions. without uniform regulations, forms for cooperation or mechanisms for joint decision - making, there is a considerable risk that we will find ourselves in “ gamelike situations ” where the countries involved act in various ways to avoid paying the crisis “ bill ”. in this type of situation there is a clear risk that all parties involved will be the losers. this is a problem that affects not only the governments and authorities in the countries suffering crises. the arrangements for crisis management, like the supervision, affect the business

zeti akhtar aziz : building a robust islamic financial system keynote address by dr zeti akhtar aziz, governor of the central bank of malaysia, at the 2nd international conference on islamic banking, kuala lumpur, 7 february 2006. * * * let me first of all extend a warm welcome to the participants of this second international conference on islamic banking : risk management, regulation and supervision, jointly organized by the islamic research and training institute ( irti ) of the islamic development bank and the islamic financial services board ( ifsb ). this forum has an important role of not only fostering the dissemination of knowledge and exchange of experiences on the subject of risk management, regulation and supervision, in facilitating a better understanding on the issues confronting us, and thus contribute towards advancing forward the development of the industry. effective risk management capabilities is particularly important in this more challenging global financial environment of heightened uncertainties and increased potential for financial vulnerabilities. and an effective regulation and supervision will ensure the soundness and stability of the system. in the recent decade, the islamic financial system has experienced remarkable growth and transformation, demonstrating its potential as a competitive form of financial intermediation. today, islamic finance represents a multi - billion dollar industry with a comprehensive range of products and services, serving a broad spectrum of consumers and businesses that extends beyond the muslim world. in developing the islamic financial system, it is important to focus on the appropriate pre - requisites that will facilitate its efficient evolution. fundamental to this is the development of the institutions, the markets, the range of financial products and services and having in place the accounting, legal, regulatory, supervisory and shariah frameworks, as well as, for the monetary authority to have the capacity to manage its financial policies within this context. with the development of these respective components having made significant progress, we are now seeing the islamic financial services industry enter a new phase of development. following increased liberalisation, the progress in the development of the international financial architecture for islamic finance and the increased innovation resulting in the development of new products and services, the international dimension of islamic finance is becoming increasingly more significant. islamic financial institutions are now also venturing their operations beyond their domestic borders. islamic - based papers are also being issued in international financial markets, generating significant interest from global investors. the international financial architecture for the development of islamic finance has also been strengthened with the establishment of the international boards to set the accounting and prudential standards. these developments have cumulatively