I am pleased that negotiation on a GCC-Singapore Free Trade Agreement has just been completed. This will help to expand trade ties. I hope this can also catalyze the broader pact between the Middle East and ASEAN, which will help to expand trade and investment flows between our two regions. Some 250 Middle East companies, including the Saudi Basic Industries Corporation, Proclad Group from Kuwait and the Emirates National Oil Company, are currently using Singapore as a base for their Asia-Pacific operations. Recently, the Al Futtaim group bought a major department store, Robinsons, in Singapore, as part of their strategic decision to expand into South-East Asia. Shariah-compliant funds which are deployed for investment in Asia have attracted strong interest from Middle East investors. One example is the ARC-CapitaLand Residences Japan Fund which was issued by a Singapore-based property developer. These are just examples from Singapore. I am sure there are more in Malaysia, Indonesia and other parts of Asia. My general point is this: the more we can bring the issuers and investors from both regions together, the more we can promote the use of Islamic Finance to fund some of these projects. 2nd task: addressing the need for appropriate legal, regulatory and supervisory frameworks for Islamic finance All of you would be aware that the IFSB and IDB have co-issued The Ten Year Framework and Strategies. 1 It is a thoughtful blueprint. The Framework highlights the need for appropriate legal, regulatory and supervisory frameworks that effectively cater for the specificities of the Islamic services providers.
23 It is important to note that these new regulatory and behavioral factors are related to liquidity in general and not strictly about reserves held in Federal Reserve accounts as in Regulation D. Banks have many possible means for addressing their requirements under the LCR, and the LCR rule does not impose any specific requirement to hold central bank reserves. 7  have various ways to meet their obligations under this system: their choices are not limited to simply holding more reserves. As a result, reserve scarcity may be accompanied by shifts in market pricing and flows that we might not have seen in the old framework. Finally, the old system provided a degree of stability over time through its ability to reallocate scarce reserves among banks in response to shocks through interbank lending in the federal funds market. This interbank activity largely dried up following the crisis and has not meaningfully returned—in part due to regulatory incentives, but also because banks report that they are now less interested in taking on financial exposure to other banks. 24 As a result, it is possible that a regime of less abundant reserves may now be accompanied by an element of increasing volatility or periodic turbulence in money markets. One new way in which scarcity might manifest itself going forward is through effects related to the LCR. Very generally, the LCR is designed to ensure that banks hold a sufficient reserve of high-quality liquid assets (HQLA) to allow them to survive a short-term period of significant liquidity stress.