integration in asia. this should be viewed positively, not only towards the unwinding of the global imbalances, but also because this has the potential to contribute towards global growth. the banking sector in asean and the greater asian region will have an important role in facilitating this trend. islamic banking in particular, which is a form of financial intermediation that is directly linked to trade and investment flows, has significant potential to facilitate this process. islamic finance requires all financial transactions to be supported by an underlying economic activity. there is now a renewed focus in the global community on generating real economic activity, generating jobs and generating overall financial stability. following the developments that have led to the current global financial crisis, there is a greater recognition for the need to reduce the decoupling of the expansion of financial transactions and the growth of the real economy. this is in fact a fundamental requirement in islamic finance thereby resulting in a close link between financial and real flows. in malaysia, the islamic banking sector continues to progress, recording double digit growth over the recent 8 years with an average annual growth rate of 20 % in terms of assets. as at the end of 2008, islamic banking has increased its share of assets in the banking sector to 17. 4 %. the assets share of the takaful industry grew at 23 % per annum in the recent five years, with family and general takaful capturing 11 % and 7 % respectively, of the overall insurance sector. the mifc initiative has focused on promoting malaysia as an international islamic financial hub, in particular in sukuk origination, foreign currency business, takaful, research and talent development. there has been a growing number of mifc players with diverse business activities that range from international islamic banking business in foreign currency to islamic fund and wealth management, takaful and sukuk origination. the global sukuk market has expanded by an annual growth rate of 40 %. despite a slowdown in the sukuk issuance in 2008, there was still an estimated usd20 billion issuance taking place, with malaysia remaining as the main issuer in the global market. the prospect of islamic finance continues to remain positive despite the more challenging international environment. the global financial crisis has resulted in heightened calls for more transparent forms of banking that are subject to stricter governance and risk management practices. there are also greater demands for increased regulation. following the financial reform that may take place, the world may see a banking system that is significantly different

muhammad bin ibrahim : central bank collaboration in asia – facilitating the use of local currencies for settlement of trade and investments remarks by mr muhammad bin ibrahim, governor of the central bank of malaysia ( bank negara malaysia ), at the signing ceremony of the memoranda of understanding between bank indonesia and bank negara malaysia and bank indonesia and the bank of thailand, bangkok, 23 december 2016. * * * my delegation and i are pleased to join governor veerathai and governor agus here in bangkok today to mark the collaboration between our central banks to facilitate the use of local currencies for settlements of trade and investments. our economies face common challenges in managing the risks from heightened volatility in the global financial markets. we can expect continued episodes of volatility to occur in the periods ahead, driven by a combination of policy uncertainties, negative sentiment and speculative activity. the arrangements signed today are part of our continuous efforts to provide the institutional and policy framework to promote orderly financial market conditions and support the efficient management of financial risks. in particular, these arrangements will enable exporters and importers in our countries to better manage foreign exchange risks by using local currencies to settle trade and investment activities. in addition to improving cost efficiencies for businesses, the increased demand for local currency financial products will also contribute towards deepening the region ’ s financial markets. this is important to further strengthen conditions for regional financial stability. when bank negara malaysia and the bank of thailand first operationalized this arrangement between our central banks in march 2016, we saw the potential and benefits for local currencies to play a more important role in enhancing regional trade linkages. the expansion of the arrangement today to include our close trade partner, indonesia, underscores this potential. the signing of this mou between bank indonesia and bank negara malaysia represents another important milestone in the move to strengthen the relationship between malaysia and indonesia. following the conclusion of the asean banking integration framework, we are confident financial institutions in both countries will be able to collaborate towards realizing the objective of facilitating greater cross - border trade and investments. both thailand and indonesia share important links with malaysia, forged through a long history of trade and investment activities, and close cooperation between our central banks. this occasion reflects how far we have come in this process. the cooperation arrangements between our central banks have now expanded to include clearly defined protocols and operational frameworks in a broad range of areas, including financial market development, supervision, surveillance,