But we also need policies for containing systemic stress more generally; and, if possible, for heading off the risk of systemic problems in the first place. Like others, in speeches I have identified three elements in that armoury: monetary policy; central bank liquidity policy; and policies towards bank capitalisation and liquidity. Monetary policy I have for some years openly queried the notion that it is enough to rely on monetary policy “mopping up” after the event. 2  BIS Review 77/2008  The “mopping up” doctrine came out of a view that monetary authorities could not spot bubbles but that policy could cushion the bursting of what turned out to be a bubble. The doctrine effectively assumes that, faced with the possibility of systemic stress, the monetary authority can always reduce its policy rate without taking risks with inflation. The current conjuncture tests that assumption. There is a nasty shock to demand from tightening credit conditions, here and abroad. And that may get worse rather than better in the coming months. So far, the financial system has faced a “trading book” problem; but we cannot rule out a “banking book” problem caused by rising defaults. We face a race involving whether the deleveraging process can be sufficiently advanced for financial conditions to stabilise before macroeconomic slowdown, here and abroad, raises loan defaults and so brings a new dimension to the challenges in the banking sector and so to the supply of credit to the real economy.
Zeti Akhtar Aziz: Strengthening linkages in the Islamic financial markets Speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the seminar on Derivatives in Islamic Finance, “Strengthening Linkages in the Islamic Financial Markets”, Kuala Lumpur, 24 June 2005. *  *  *  Distinguished Guests, Ladies and Gentlemen, "Islamic finance in Malaysia today has become increasingly more entrenched and integrated both on the domestic and international fronts. The successful integration has contributed to its rapid growth in assets and created a more robust and resilient Islamic financial system. The challenge now is to further strengthen the linkages in the respective components of the Islamic financial system, in particular, the Islamic financial markets. " It is my pleasure to welcome you to this seminar on Derivatives in Islamic Finance jointly organised by Bank Negara Malaysia and the Financial Market Association of Malaysia. During this recent two days, we have organized the Investors Conference, the seminar on the 10-year Masterplan on Islamic Finance and the dialogue among Shariah scholars which have gathered an extensive participation, from policy makers, investors, industry players and Shariah scholars. Today's event is another important initiative which brings together financial experts to deliberate on a vital aspect in the development of Islamic finance. Ladies and Gentlemen, The successful development of a robust and resilient Islamic financial system depends on the ability to integrate the various components of the Islamic financial system that includes the Islamic banking industry, takaful and the money and capital markets.