advanced economies ( graph 4 ). r e s e r v e b a n k o f au s t r a l i a graph 4 debt levels for households are also relatively high in australia ( as a proportion of incomes ) ( graph 5 ). combined with the significant rise in outstanding mortgage rates, this has led required mortgage payments – interest plus principal – to increase by 2. 5 percentage points of total household disposable income since may 2022 ; the increase as a share of mortgage holders ’ incomes is much larger still. these mortgage payments have reached record highs in australia ( graph 6 ). 8 graph 5 graph 6 despite the substantial increase in mortgage payments, there has been little increase in acute financial distress among borrowers. mortgage arrears rates have risen, but they remain low and at similar levels in australia and the united states ( graph 7 ). this is despite the significant rise in required mortgage payments in australia. 9 the low levels of defaults in both economies partly reflects the large savings buffers many households built up during the pandemic as well as benign labour market conditions, since unemployment tends to be a strong predictor of mortgage arrears. 10 r e s e r v e b a n k o f au s t r a l i a graph 7 financial distress has also been contained, in part, by the way that interest rate exposure of australian mortgage holders is managed by banks ( overseen by the regulators ) as well as by the borrowers themselves. in short, these contribute to borrowers having buffers that can lessen the burden of adjustment in the face of a rise in interest rates. banks account for interest rate risk when setting their lending policies and the australian prudential regulation authority ( apra ) ensures that banks maintain prudent lending standards. when a bank determines how much to lend a prospective borrower, they must assess the borrower ’ s ability to service their mortgage at an interest rate 300 basis points above the current rate while still meeting basic living expenses. 11 this buffer recognises the risk associated with rates increasing as well as other risks – such as to income or unexpected spending needs. 12 borrowers play a key role in managing their own interest rate risk. this starts with their decision on how much to borrow. historically, only a small share of new borrowers took out loans close to the value of the maximums on offer. in 2022, only around 15 per cent of new owner - occup

heng swee keat : monetary authority of singapore ’ s initiative to develop singapore dollar sovereign - rated sukuks speech by mr heng swee keat, managing director of the monetary authority of singapore, at the 5th annual islamic financial services board summit, amman, jordan, 13 may 2008. * * * introduction it is my honour this afternoon to join my ifsb colleagues in discussion of this very current topic. i am very glad that we are addressing this issue of regional integration of islamic financial services at this point. this is very timely and relevant to both the soundness and vibrancy of islamic finance. let me explain. the global islamic finance industry has grown rapidly – it is estimated that total assets are now over us $ 750 billion. this is impressive. still, this is a small proportion of conventional finance. the potential for growth is hence very large. while each country is taking measures to promote islamic finance, we can grow much faster as well as increase the scope and depth of the industry if we work towards integration at an early stage. integration increases market size, efficiency and liquidity. this in turn provides for more competitive cost of capital, spurring further growth. second, having service providers from different regions allow risks to be distributed across a wider group of players, and can improve the overall stability of the financial system. regional integration between middle east and asia, which may have different business cycles, provides a cushion for financial institutions and investors from country specific shocks. third, integration promotes greater interaction and knowledge sharing, and can help lift the standards of the islamic finance industry. in short, the 3 facets – development, integration and stability of markets – are closely intertwined. proper attention to all these 3 facets will enhance the soundness and vibrancy of islamic financial services. we are in fact seeing greater integration already with more cross borders flows, both within the middle east and asia, and between the two regions. banking and capital markets are opening up to foreign investors, more shariah products are listed on stock exchanges and islamic financial service providers are expanding their operations overseas. this is a promising trend. three tasks we should build on this positive momentum. allow me to share my views on three broad categories of essential tasks in promoting greater integration in the coming years. 1st task : promoting more economic integration first, financial integration and economic integration are deeply linked, and mutually reinforcing. hence, to promote financial integration, we also need to focus on economic integration