compromised by boom - bust cycles, which is why there has been a resurgence of interest in how we might avoid or reduce these. during booms, lending standards may fall significantly and lenders may underprice risk, with too much credit being allocated to any one sector ( such as the rural sector or property development ). in turn, when the boom turns to bust, the over - allocation of credit may be revealed when physical and human resources become underemployed. international evidence suggests what might be more important for competition and efficiency is how “ contestable ” the banking system ( or individual banking product markets ) is, rather than simply how many banks operate ( i. e. market structure ). contestability is influenced by both the actions of incumbent banks, and by various formal and informal barriers to entry and exit. bis central bankers ’ speeches cross country comparisons undertaken by the oecd suggest formal regulatory barriers to entry and exit to the new zealand financial system are low by international standards. 2. while banks seeking registration must meet minimum qualitative and quantitative criteria so that their entry to the market is consistent with the soundness and efficiency objective, the reserve bank does not impose quotas of any kind nor do we restrict foreign ownership. however, the costs associated with establishing a new retail branch network in new zealand appear to be high given the small scale of the market. notwithstanding the success of kiwibank in the retail market, the fact remains that it is difficult for new players to enter the new zealand market and assume a competitive position other than through direct acquisition of an existing bank or by specialising in a narrow market segment. in terms of informal barriers to entry, one such barrier may come about from the practical difficulties customers face switching between banks. shifting one ’ s banking activities from bank a to bank b is usually a more involved process than shifting between cellphone providers or electricity companies. the customer inertia that this creates makes it difficult for new entrants to gain critical mass even if they price their offerings keenly. encouragingly, some of these barriers may have eased recently through technical innovations at the payment systems level orchestrated by payments new zealand ( pnz ). more switching implies greater incentives for banks to compete and innovate. figure 2 post tax return on equity – oecd comparison ( average 2002 – 2007 ) source : oecd, australian prudential regulatory authority, rbnz calculations. oecd ( 2006 ), competition and regulation in retail banking

financial institutions would strengthen the ability to leverage on the industry's expertise. the introduction of innovative islamic financial products in a specific jurisdictions can be expanded to other jurisdictions, which in turn, will contribute to broaden and deepen islamic financial markets and thus strengthen the overall development of the islamic financial industry. in addition, collaboration between academic researchers and the practitioners will enable the practical application of such research findings. in the area of education and training in islamic finance, there is now a critical shortage of talent in the islamic financial industry. collaboration between training institutions is vital to developing the pool of expertise in islamic finance that subscribes to common standards. establishing a network of mutual co - operation and collaboration would strengthen the efforts among the institutions of higher learning across regions in the areas of curriculum development, research, training, exchange of ideas and information, and resources in islamic finance. such partnerships in connecting the knowledge communities between regions would facilitate this process. in the area of shariah, the progressive convergence of shariah views and rulings, the mutual recognition of financial standards and products across jurisdictions would be major driver towards greater international financial integration. such a convergence and harmonisation can only happen with greater engagement among the regulators, practitioners and scholars in islamic finance in the international community. finally this integration process also requires greater cooperation among the regulators to ensure that the islamic financial system is not subject to vulnerabilities and abuses and thus ensuring its soundness and stability. in this respect, the sharing of information among the regulators including across borders is important especially in a more globalised and liberalised environment where financial transactions and activities have become more complex and globalised. in this regard, there is a greater need for regulators to be continuously connected to share information on key issues and developments faced in their own financial jurisdictions. in this respect, the islamic financial services board has an important role to facilitate this process. closer financial linkages among islamic financial institutions from different jurisdictions is essential to contribute towards accelerating the process and towards serving as a bridge to strengthen the relationship of the international islamic financial markets as well as the investment and trade ties between regions. such linkages within the industry could also lead to new product offerings and to co - arranging financing. there could also be mutual development of it systems and other technologies including other research and development endeavours. finally, let me touch on the development of the socio - economic aspects of islamic finance. while " profit motivated " islamic financial institutions will continue to evolve and gain greater significance, this