, and thus preserving the financial stability of the institution. the third point is that the growth of islamic banking and finance offers substantial new opportunities with respect to designing otc derivatives compliant with the syariah principles and appropriate for commercial use. as bankers and legal practitioners involved in the otc derivatives industry, i believe these points will be of relevance to you in providing quality services to your clients and in developing your organisation ’ s otc business portfolio. there are significant opportunities emerging in the asian region. regional integration has become more pronounced in recent years with the more rapid expansion of intra - regional trade in asia. intraregional exports account for about one third of total exports of the region. intra - regional trade with the asean nations accounts for about 24 % of the region ’ s total trade, exceeding asean ’ s trade with the united states. trade with china, india and korea has increased significantly. notably, since 1993, china ’ s role in the region has reversed from that of a net exporter to a net importer. east asian exports to china have doubled during the past decade. there has also been a trend towards greater intraasian investment flows in the region. this includes higher investment of surplus funds into the region, in the form of foreign direct investments as well as portfolio capital flows. these regional developments will lead to greater demand for otc financial derivatives, which can be met by any of the major national, regional or global financial institutions operating in these markets. malaysian banking institutions must be prepared to compete in this highly innovative and agile global industry by staying ahead on the learning curve for writing otc derivatives that precisely match the risk management characteristics needed for effective hedging. at the same time, banking institutions must take into account the need for robust internal controls specifically in the area of credit, market, operational and legal risks to prevent the failure of any derivative contract. my second point concerns the new basle ii capital accord. the international swap dealers association, as the global trade association representing the leading participants of the otc derivatives industry, has provided its views to ensure that the capital requirements of the new capital accord ’ s will reflect the actual amount of risk that a bank is exposed to in a particular derivatives transaction. according to the recommendations put forth by the basle committee, capital requirements to support off - balance sheet derivatives are calculated by reference to the credit risk of the item adjusted for credit quality of the counter party. the approach essentially “ marks to market ” to determine the current replacement cost

##iquid assets for treasury bills for a period of up to three years. incredible, unseen till now. however, some knew, others maybe did not, that is far from sufficient. that the liquidity injecting has vital role only to delay, prolong the immediate, forthcoming collapse. that such steps can help to overcome the crisis only until the elimination of the actual reasons that were spreading the distrust. also, to help understanding the severity of the fundamental problem and to postpone the inevitable day for calling to account. " exactly as the high temperature, the fever ( as mervin king wrote ) is by itself a symptom for the basic condition, thus the freezing of the interbank and money markets was a symptom for deeper structural problems in the banking sector ". that is why another group of measures had to follow. the new, additional measures were designed to eliminate the fear arising from the thought and the facts that the banks are insolvent. to ensure that the banks have enough capital to survive the harsh economic plummeting and hence, to enable them to continue lending on normal criteria for the good credits. with a fully solvent banking system, guarantees may be given without exposure of the tax payers to unacceptable risk ( just to mention that the british tax payers currently have larger claims in the form of bank assets, as collateral maintained by the bank of england, than the total value of the banks'capital in england ). that is the reason why the morning of october 8, the prime minister of england and the minister announced the plan for recapitalization of the banking system, which was then, one way or another, followed by others in the world, primarily usa and europe. more precisely, why did this radical plan have to follow? when the financial turmoil commenced ( in august 2007 ), the markets of numerous financial instruments, including the mbs ( mortgage - backed securities ), ceased functioning. they dried out. most of the analysts thought that it is on a temporary basis. but, the time passed and the markets failed to reopen. it became clear that the problem is much bigger. the concern that insolvency is in question was rising and it was verified. actually, it became evident that the main problem is solvency and sustainability of the financing model. that is why the liquidity injecting was only intended to buy some time. the securitized mortgages, polling of mortgages sold through securities, including the infamous