governor title date event venue : mr. tariq bajwa : sbp ’ s 70th anniversary : welcome note by governor sbp : july 01, 2018 : state bank of pakistan ’ s 70 - year celebration event : sbp head office karachi. state bank of pakistan ’ s 70th anniversary welcome note by governor sbp governor sindh mr. zubair, honorable finance minister, dr shamshad akhtar, respectable former governors, state bank of pakistan, dr. ishrat husain, mr. yasin anwar, mr. ashraf wathra distinguished guests, ladies and gentlemen, assalam - o - aliakum and a very good morning! it is my pleasant duty and distinct privilege to welcome you all to the 70th anniversary of the establishment of state bank of pakistan. on the auspicious occasion of the opening of the sbp on july 1st, 1948, the quaid said : “ the opening of state bank of pakistan symbolizes the sovereignty of our state in the financial sphere. i need to hardly dilate on the important role the state bank will have to play in regulating the economic life of our country. the monetary policy of the bank will have a direct bearing on our trade and commerce, both inside pakistan as well as with the outside world and it is only to be desired that our policy should encourage maximum production and free flow of trade. ” page 1 of 4 the sbp as an institution has tried to live up to the expectations of the quaid. from a modest beginning in borrowed premises, ladies and gentlemen, sbp rose to have earned the reputation of being a professional, progressive and forward - looking institution. the journey has been challenging, arduous, but rewarding. this has been achieved by the grit and determination of those who have served in this organization during these decades. the example was set by our first governor mr. zahid husain who guided the bank through its infancy and laid the basis of a sound financial system in face of an almost nonexistent banking system. over the years, the passion, commitment and integrity that the rank and file of this institution has exhibited is unmatched by any other organization in pakistan. sbp is one of the few public institutions in the country that have adhered to excellence in all fields especially human resource. with a competent and motivated human resource, the sbp has always strived to deliver the best and remained ahead of time compared to its regional peers. it

including the potential future exposures. one particular development that should be observed is the growth of the use of credit derivatives. the 2001 triennial survey of foreign exchange and derivatives market activity conducted by the bis indicates a rapid expansion of the market for credit derivatives, with outstanding positions increasing from 108 billion us dollars in 1998 to 695 billion us dollars in 2001. the centre for the study of financial innovation has identified credit derivatives as a major risk area due to their rapid growth coupled with a lower understanding of the product. the implementation of basle ii ’ s risk weighted approach to capital adequacy will have implications for banking institutions whose risk management systems have not assessed correctly the exposure due to off - balance sheet derivative items. as i have mentioned earlier, globalization and regional integration are introducing changes that will alter the nature of risks relevant to international trade, capital and the use of derivatives for risk management. banks should be transparent and upfront in disclosing the risk and valuation approach of their derivative products such that the inherent risk of the product is adequately addressed. let me also stress that the effectiveness of the risk adjusted capital requirements hinges not only on the capacity to perform sound risk assessments, but also on the legality of such derivatives transactions. how banking practices and products reflect clearly and fairly the requirements of current and proposed prudential standards in their dealings with clients is a challenge, both for bankers and lawyers. the availability of a sufficient pool of legal experts in the malaysian legal fraternity who are well versed with the detailed content and strategic intent of the prudential requirements will contribute immensely to the future development of the malaysian derivatives industry, and as a consequence provide more opportunities for greater innovation in risk management within the malaysian financial system. let me now turn to the final point i wish to make, which is about the opportunities within the rapidly growing islamic banking and finance sector to develop derivatives that facilitate hedging of risks. the islamic financial system, comprising the islamic banking industry, the islamic money and capital markets, and the takaful market, is becoming an increasingly important component in the malaysian financial system and in the global arena. indeed, the islamic capital market has registered very strong growth. in the debt market, the outstanding islamic private debt securities as at the end of june 2003 was rm 68. 2 billion, or 37 % of total outstanding private debt securities. malaysia has also made progress in developing offshore islamic banking and financial products. the latest listing of the inaugural sukuk by the government of qatar