Nowadays, even presentations firmly oriented on return-maximising investment decisions dedicate more time to look at the absolute risks of trading strategies and assets, and this is particularly true for credit and liquidity risks. BIS central bankers’ speeches  1  Indeed, during the current crisis we have learned the hard way that those “forgotten” risks, which were perceived as not deserving a single slide in many presentations of the past, matter more than we previously thought. For those holding responsibilities in the design and implementation of public policies, to observe the increasing recognition among market participants of the importance of strengthening risk management practices constitutes one of its very few positive consequences. Causes and dynamics of the crisis Some of the main lessons from the crisis seem obvious in hindsight, but unfortunately were not seen as such before the outburst of the financial turmoil in 2007 and 2008. In particular, there are clear indications that the way we look now at the trade-off between risks and returns has significantly changed over the past thee years and a half. However, the key question is whether the shift in attitude towards risk has changed only as a consequence of the materialisation of some “forgotten” risks or whether there is a deeper and more structural explanation for this shift.
Looking around, I am delighted to see many friends from corporates, banks, fund management firms and other industry professionals sitting here, keen to learn more about sukuk. I am sure that the experts gathered here today will be able to shed light on how sukuk can be a viable fund-raising tool and an attractive investment instrument. Before that, allow me to take this opportunity to say a few words, from a policy perspective, on why developing an Islamic finance platform is important for Hong Kong, and our plans in building this platform. What’s in it for Hong Kong to develop Islamic finance? 4. Islamic finance has become increasingly important in the global financial market, registering exponential growth over the past few years. Compared with a size of only $ billion in 2008, the global Islamic financial industry has expanded remarkably to an estimated $ trillion by the end of 2013, representing an annual average growth rate of 21%.1 According to market estimates, there is huge potential for further growth, with Islamic financial assets expected to reach $ trillion by 2020.2  5. A major growth area for Islamic finance is the sukuk market. Ten years ago, new sukuk issuance was only a modest $ billion. In just ten years’ time, annual sukuk issuance has already surpassed $ billion, amounting to $ billion in 2013 which was more than 20 times higher than the figure in 2003.3  6.