ability to anticipate, manage and mitigate the impact of crises. internally, within bank negara malaysia, we are continuously enhancing our ability to respond effectively to crises. this involves understanding the financial landscape and 1 / 5 bis - central bankers'speeches vulnerabilities within the system and taking corrective actions towards improving them. a key aspect of this includes ensuring that our prudential frameworks, such as riskbased capital requirements and proportionality in regulation, remain robust and adaptive to the changing environment. along the spectrum of crisis preparedness initiatives, recovery planning stands out as the primary line of defence for financial institutions to handle stress beyond their risk appetite. for this reason, bank negara malaysia views financial institutions'recovery plans as a critical element in elevating crisis preparedness of the banking system. the submission of the first recovery plan from banks last year is an important step forward in the industry's commitment to being crisis ready. but our journey is just beginning. the end game is not the plan, but rather, everything that goes into ensuring that the plan is credible and works when needed. in other words, careful planning rather than the plan itself is what ultimately provides confidence in the ability to respond to and recover from crises. industry must therefore continuously review and refine their recovery plans. institutions should consider if these plans on paper can be operationalised in a timely manner and understand how they interact with the rest of the financial system to ensure risks are properly identified and mitigated. in this regard, experience from past crises may provide useful insights. by analysing past crises, financial institutions can identify weaknesses in their recovery plans and refine their strategies accordingly. for example, the market reactions to decisions made by regulatory authorities during the 2023 banking turmoil in the us and europe provide invaluable insights into the feasibility of various recovery options. the recent crisis has also raised concerns on the effectiveness of loss absorbing capital including the treatment of credit hierarchy. australia has recently proposed to phase out additional tier 1 capital instruments to be replaced with more stable and reliable capital. in malaysia, these instruments account for less than 5 % of total tier 1 capital. we will continue to respect the creditor hierarchy of claims and monitor further developments in this area. another key lesson from the recent banking crisis is the critical importance of transparency and timely communication. financial institutions must prioritise clear and consistent communication with stakeholders to maintain trust and stability especially during periods of uncertainty. now, as we strengthen

zeti akhtar aziz : islamic finance – the new regulatory challenge introductory remarks by dr zeti akhtar aziz, governor of the central bank of malaysia, at the book launch of “ islamic finance – the new regulatory challenge, 2nd edition ”, kuala lumpur, 22 july 2013. * * * it is my pleasure to be here this afternoon to witness the launch of the second edition of “ islamic finance : the new regulatory challenge ”. as the islamic financial industry transitions into a new era of growth and development in this post - crisis world, the evolving regulatory reforms that are taking place to strengthen the resilience of the financial industry has presented wide ranging challenges in the implementation of the reforms and in also ensuring a more inclusive and stainable growth. the various dimensions of these regulatory challenges and its impact on islamic finance are captured in the publication that is being launching today. it is indeed a more challenging time for financial regulators and policymakers worldwide. priorities for strengthening financial stability and growth are now focused on achieving global financial systems that serve the needs of the real economy. driven by concerns to ensure that banking institutions are more robust against mutil - faceted and more complex dimensions of risks going into the future, regulatory efforts are being directed at significantly strengthening the capital and liquidity structures of banks, and ensuring that there is better alignment between risk - taking behaviours and long - term viability as well as ethical conduct. at the centre of the reforms have been the basel iii reform package, principles for riskaligned compensation structures and improving the consistency of regulatory regimes across the different parts of the financial system, including the shadow banking institutions. significant work is also progressing to strengthen resolution regimes and financial safety nets, particularly in a cross - border context. given the specificities of islamic financial institutions, the implementation of these reforms require a careful examination of the different implications that they present for individual institutions and the system as a whole. we are now witnessing wave of the internationalisation of islamic finance as the role of islamic finance has expanded to become significantly more globalised. this has resulted in domestic islamic financial systems to become more inter connected and with the consequence that integrated, risks are more rapidly transmitted across the financial system. building on the foundations that have been put in place with the adoption of prudential standards introduced by the islamic financial services board ( ifsb ) in the key areas of capital adequacy, risk management, corporate governance and shariah governance, the regulatory, supervisory and legal framework