, but that fosters innovation and competition thereby support the growth potential of the industry. essentially, the design and strategies needs to secure the twin objectives of achieving continuous business performance and robust corporate accountability. as the level of innovation increases in a more liberalised and deregulated environment, a governance framework that is more principle - based rather than rule - based becomes relevant. the approach would thus need to develop the broad but clear guidance, standards and core principles rather than prescriptive rules and regulations. the process would involve identifying the risks and ensuring that the institutions have the capacity and mechanisms of internal controls and the systems to undertake and manage the recognized risks. while good governance is indispensable, the relevant principles needs to be applied in a manner that is in harmony with the nature of the different transactions peculiar to islamic finance. in particular, the framework should endeavour to engender the support of all the stakeholders of the islamic financial institutions. this entails having in place the systems that will ensure that the obligations to all the major stakeholders - the customers, depositors, investors, entrepreneurs, owners and the community at large - are met with integrity and with adherence to the rules and regulations. indeed, in an environment where businesses needs to balance between the interests of the various stakeholders which at times could be conflicting, an appropriate governance framework for active checks and balances becomes particularly important. while the roles of shareholders and board of directors are certainly critical, it should not diminish the roles of the other stakeholders. secondly, there must be robust corporate governance framework at the institution level with the shareholders and the board as key players. at the institution level, corporate governance is essentially about how the company is managed and controlled and the manner to ensure proper accountability for those in - charge. central to the corporate governance framework is thus to ensure integrity, strong internal controls and risk management practices. in this connection, the shareholders'greatest influence is in the appointment of both the independent and non - independent directors ; to ensure the selection of those who are able to set clear direction and drive for effective corporate governance at the institutional level. the shareholders have a role to ensure that the board comprises a good mix of competent persons with relevant experience to provide effective representation. the board of directors must be able to protect the long - term objectives of the institution and provide leadership for good governance by setting a clear corporate governance framework for the institution, and effectively monitoring its implementation. the institutional broad governance framework will serve as the focal point of reference

advanced economies, including the unprecedented monetary easing, the fiscal stimulus then consolidation, the repair and resolution of the financial sector, the initiatives to reduce public and private sector indebtedness, and the consequences of the global regulatory reforms. the highly accommodative global monetary environment has generated higher global liquidity. while contributing to the resumption of credit flows, it has exacerbated the recent surges in capital inflows to emerging economies. these inflows have resulted in significant strengthening of currencies, rising asset prices, stronger credit growth, and for some, overheating conditions in the economy. these inflows have, however, been punctuated by reversals in capital flows, following deleveraging activities mainly by the banking groups in the crisis - affected countries. deleveraging by sovereigns and by households, in particular the united states, have also reinforced this trend. the deleveraging by banks was, in particular, felt in 2009, following the actions by banks in the united states to strengthen their capital positions, and more recently by banks in the europe to meet the new capital adequacy requirements. in view of the challenging conditions for capital raising, this is being achieved, in part, by asset reduction, either by asset sales, in particular in performing economies, or the withdrawal of credit lines. these operations not only have implications on asset prices but on currency movements, as funds from the asset disposal are remitted back to the home country. the reversal of capital flows following such deleveraging is thus accompanied by a correction in asset prices and depreciation in the currencies. for emerging economies, the more developed and liberalised the financial markets, the more significant will be the impact of such activities, and the greater will be the amplitude of the volatility in the asset prices and currency movements. global policy spillovers have also been transmitted to the real economy through trade and investment flows. the world economy, including emerging economies, benefitted immensely from the fiscal stimulus that supported the economic recovery. however, as the deterioration in fiscal sustainability became a concern, the effects of the pull - back in public expenditure on growth have contributed to slowing world trade and cross - border investment activity. emerging economies, in particular in asia, have seen the export sector slow significantly. bis central bankers ’ speeches while foreign direct investment continues to gravitate to emerging economies, in particular to asia, the scale of such investment activity has also