its monetary policy operational procedures for appropriateness and effectiveness, and changes are implemented when deemed necessary. as you are aware, various changes were implemented in august 2010 and march 2011 following research conducted within the bank as well consultations with market participants through the financial markets liaison group ( fmlg ). as a result of the changes, the actual daily liquidity requirement increased markedly from a daily average of r10, 3 billion in the twelve months before august 2010 to an average of r15 billion in the next twelve months, and further to an average of r16, 8 billion from september 2011 to 30 april 2012. the number of banks participating in the main repo auctions has increased from four to a total of six and at times, seven banks, with the combined bid amounts tending to be higher than the announced average weekly liquidity requirement. the introduction of longer - term foreign exchange swaps with maturities of up to twelve months has improved the reserve bank ’ s open market operations and has led to the more effective management of money - market liquidity. the discontinuation of the practice of announcing the estimated weekly liquidity ranges to the market has significantly reduced the reserve bank ’ s activity in the money - market. participation in sarb debenture auctions has also improved. following further consultations with market participants, another set of enhancements to the reserve bank ’ s monetary policy operational procedures was implemented on 01 march 2012 : • when the auction is oversubscribed, the amounts tendered for by commercial banks in the weekly main repo auctions are now allocated on a pro rata basis, up to the announced average daily liquidity requirement for the week ; • the bank now conducts 2 - and 5 day main repo auctions during the week of the mpc meetings ; and • sarb debentures and reverse repos are now issued with maturities of 7 - and 14 days, in addition to the usual 28 - and 56 days maturities. these enhancements have further improved the functioning of the money market, especially the interbank market, have also increased the level of flexibility in the reserve bank ’ s liquidity management operations, and have eliminated the lack of synchronisation between the reserve bank ’ s main repo auctions and the mpc interest rate announcements. this lack of synchronisation had previously led to discrepancies in the market, as interest rates in the interbank market changed when the repo rate was changed

a neighbouring jurisdiction. islamic financial products need some level of harmonisation in terms of product features to gain mass acceptance. we at the central bank of bahrain are working with the international islamic financial market to set certain standards on some capital and money market products, but banks themselves could work more closely to establish common disclosure standards for the costs of financing. additionally, we at the central bank have noted the continuing need for high quality human resources within islamic banks. islamic banking has been growing so fast that it has been difficult for banks to find enough skilled or qualified staff. this is why the cbb has participated with islamic institutions in bahrain in setting up the waqf fund to provide financial and technical support in upgrading current training programs and introduce new ones. it is hoped that we will begin to see a larger number of financiers qualified in sharia – related subjects in the near future. such initiatives can only be to the benefit of islamic banking and i urge more institutions to participate in the funding and support of the fund and its works. i think at this point i should talk about governance challenges facing islamic financial institutions. a major issue which is growing in importance is sharia compliance and how to provide a satisfactory framework to assure investors and other stakeholders that the activities of the bank are within the permitted scope of sharia. islamic banks have various mechanisms to ensure sharia compliance in the products and activities of the institution. the first and most obvious body is the sharia supervisory board. this body produces judgements or fatwas on products or structures that the bank intends to provide. the next body is the internal sharia review function which performs post - facto reviews of the activities of a bank. the last body is the external auditor which, in addition to verifying the accounts of the bank, also checks to ensure that the bank correctly followed aaoifi sharia standards. there are differing perceptions about the respective scope of authority of these three bodies and therefore there is a need to reach consensus on the functions of these respective bodies. this is clearly an area where the institutions, sharia scholars and the standard setters need to agree upon what constitutes best practice and set an agreed set of standards. the next challenge is that of accounting standards. there are currently some 60 aaoifi accounting, auditing, governance and sharia standards. this body of work is testimony to the commitment and continuing efforts of aaoifi since its establishment in 1990 to the development of accounting and auditing standards for islamic institutions. however