standards of financial and business practices. this is encouraging as ultimately, both the industry and bank negara have a common interest in promoting an efficient and stable insurance market in malaysia. at bank negara, we are continuing to strengthen our regulatory and supervisory capabilities as well as sharpen our focus. as those from malaysia would be familiar, we are now into the fourth month of the bank ’ s new regulatory and supervisory structure. the new organisational structure for the regulatory and supervisory functions within the bank were realigned back in november last year to move from the previous sectoral approach to regulation, to one that will integrate the bank ’ s regulation of the different financial sectors under its purview along functional lines. as a result, the functions previously under the former insurance regulation department have now been assumed by the newly established financial sector development department, the prudential policy department, the consumer and market conduct department and the financial surveillance department. on the supervision side – or better known to you as the examiners that come and pay you a visit every now and then – a new department known as the financial conglomerates supervision department has also been established to facilitate the integrated supervision of financial service groups that include both banks and insurance companies under their umbrella. the new cross - sector regulatory structure allows us to modernise the regulatory framework for both the insurance and banking sectors at a more equal pace. the increased synergies created will enable the bank to apply the best regulatory practices in the banking sector to the insurance sector, and vice versa. regulations in the area of market conduct, for example, are more advanced in the insurance sector than they are on the banking sector. on the other hand, the regulatory framework for risk management and capital adequacy is generally more developed on the banking side. under the new structure, the bank is able to leverage on the more advanced developments in either sector to enhance the regulatory framework for both sectors simultaneously if possible. this, in turn will promote a more consistent and comparable regulatory regime for the banking and insurance sectors. substantial resources have already been allocated to this effort, particularly in the areas of corporate governance, product regulation and financial reporting which have an important bearing on banks and insurers that are within the same group. the rationalisation of current regulations will also take into account international developments which will help to reduce the compliance costs for internationally active insurers operating in malaysia. the transition to the new structure has, so far, been smooth. as expected, the industry is

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