first place. should an institution experience difficulties, capital serves as a buffer to absorb losses and reduce the risk of spillover from a problem institution to other financial institutions. the primary tool of capital regulation currently is the set of minimum ratios that were devised in 1988 by the basel committee on banking supervision. they were set forth in an agreement known as the basel accord, and were adopted, among other reasons, to address the slide in international capital levels that was occurring over the previous decade. the accord was clearly a milestone achievement for the first time, supervisors in g10 countries were able to use a common yardstick for assessing banks ’ capital adequacy. but the accord has a number of serious shortcomings. for example, it does not adequately differentiate among degrees of credit risk and, as a result, banks have had incentives to take on higher risk exposures within broad risk categories. banks have also tended to engage in transactions that lower capital requirements without reducing economic risk. in addition, it has proved difficult to incorporate into the accord ’ s simple risk - weighting scheme the innovations of the last decade in the way banks manage and mitigate risk. as market risk management techniques developed, we were able to incorporate a state - of - the - art, value - at - risk approach in a 1996 market risk amendment. still, as credit risk management techniques have advanced, and as the importance of operational risk management has increasingly been recognized, it has become apparent that the long run relevance and efficacy of the basel ratios as an indicator of capital adequacy has been eroded. supervisors have long known that analyzing simple capital ratios in isolation can lead to incorrect conclusions about the relative strengths of institutions. thus, we also have relied on a review of banks ’ capital plans and on market discipline to assess capital adequacy. in june of last year, the basel committee formalized the link between these elements when it released a consultative paper laying out our vision for a new, more refined capital adequacy framework. in addition to establishing minimum capital requirements, the proposed framework places increased emphasis on the supervisory review of capital adequacy and the role of market discipline. we refer to these elements - minimum standards, supervisory review and market discipline - as the “ three pillars ”. together these pillars mutually reinforce safety and soundness by aligning capital relative to risk and by encouraging prudent risk management. this evolution in the committee ’ s thinking about capital adequacy follows from much of

into the emerging markets. additionally, there are opportunities for ethical investments as more than 80 % of equities listed on the malaysian stock exchange are shariah compliant. as one strategy to enhance cross - border financial activities, turkish banks and relevant entities might wish to consider being members of bursa suq al sila ’ to facilitate liquidity management in the islamic financial market. the bursa suq al - sila ’ is the world ’ s first end - to - end islamic multi - currency commodity trading platform to enhance liquidity management for islamic financial institutions. this fully - electronic platform facilitates sukuk structuring, islamic financing and investment transactions including inter - bank placements and customer deposits, by applying the concept of murabaha and tawarruq. since its establishment in 2009, 23 commodity trading participants from malaysia, the middle east and europe have been registered in bursa suq al - sila ’, contributing to the growth in its trading volume where 1370 trades were recorded in q1 2011 with a total value of usd18 billion as compared to 728 trades in the final quarter of 2010 that totalled to an estimated usd11 billion. thirdly, opportunities to collaborate in the area of islamic fund management. following the launch of the first participation bank index by the istanbul stock exchange earlier this year, the investment products introduced in the turkish market have been expanded to include islamic equity funds and products. through collaboration and strategic alliances between malaysian islamic fund management companies and the participation banks in turkey, the development and distribution of shariah compliant funds across borders could be made possible and new investment options to divest the savings of retail clients, as well as in the bis central bankers ’ speeches development of investment strategies to meet the needs of high net - worth individuals or sovereign funds. fourthly, partnership in innovation – where the malaysian and turkish financial community could jointly develop innovative products and investment instruments, provide consultation and advisory services on complex legal, accounting, tax and shariah matters as well as developing human talent to support the development of islamic finance. joint shariah research could also be conducted with international shariah research academy, dedicated research in applied islamic finance based in kuala lumpur. and finally, on the education and research front, possible collaboration can be explored between the international centre of education in islamic finance or inceif and turkish universities to give opportunities for turkish students to enrol in professional and postgraduate programs. students from turkey intending to deepen their knowledge