By contrast, there was a population of 133 deposit-takers – the so-called “section 123” companies – that were identified as such by the Board of Trade, a body that did not possess the requisite powers of supervision over the 16  institutions concerned . A gap therefore emerged in the regulatory perimeter with significantly limited oversight. The consequences for the Bank were profound. 12  Ibid, p.777 Ibid, p.760 14 Gardener, Edward (ed). UK Banking Supervision: Evolution, Practice and Issues, London, Allen & Unwin, 1986, p.87 15 Ibid, p.100 16 Ibid, p.102 13  6  All speeches are available online at www.bankofengland.co.uk/speeches  6  The total lent during the Lifeboat operation exceeded £ at the peak – equivalent to just over £ in 17  today’s money – and there was “a growing realisation that the Bank of England supervisory system was 18  not rigorous enough for the more demanding era heralded by the events of the early 1970s” . Indeed, Gardener notes, presumably in relation to the secondary or “fringe” banks, that “there are other cases where, in dealing with a few of our newer charges, there must remain a question whether gentlemanly discussion 19  and exhortation to observe prudent practices will on their own always produce the desired result” . Moreover, the crisis, at least in part, encouraged the European Economic Community (EEC) to introduce a requirement that deposit-taking institutions ought to be licensed.
The IFSB will also have a prominent role in facilitating the streamlining of the standards covering the cross-border supervision issues including the home-host supervisor issue. Since its establishment just over a year ago, the IFSB has attracted a wide participation. To-date, there are 13 full members, 3 associate members and 20 observers in the IFSB. This encouraging development demonstrates the keen interest towards the orderly and sound development of Islamic banking and finance. The wider participation which also includes several international and regional multi-lateral agencies will facilitate the consultation process and the adoption of these standards. Another important role to be played by IFSB is in the harmonization of the different Shariah interpretations towards a more universally accepted practice. These positive developments are expected to bring about a more robust regulatory and supervisory framework for the Islamic financial institutions to promote financial stability in the system. Second, existence of strong corporate governance It is also recognised that good corporate governance reinforces sound regulation and supervision. It contributes towards maintaining market confidence, and strengthening transparency and accountability. Its emphasis is to be value-oriented and promote fairness and justice with respect to all stakeholders of the banking institution. For corporate governance to work, good corporate practices need to be instilled and embedded in all aspects of the operations and at all levels within the organisation. Indeed, Islam strongly advocates all forms of positive governance. These values and ethical conduct have already been in built and are inherent in the community.