In particular, getting the financial system to play its proper role is critical. So let me turn to my second reflection on the role of financial services. Many causes have been cited for the current financial crisis – excessive leverage, complexity and risk-taking incentivised by inappropriate compensation systems; pro-cyclical regulatory requirements and inappropriate cost of capital; the flawed originate-to-distribute model in credit origination that worsened the principal-agent problem; the role of rating agencies; and the use of instruments such as CDS and CDOs that were supposed to distribute risks more broadly but ended up concealing and concentrating risks instead. The list goes on. Each of these plays a role but if we are to identify a common factor across these various causes it is this: that finance has become detached from economic realities. As we look to develop our financial system, we have to bear in mind that the basic role of finance is to allocate scarce capital to its most productive use. We earn a return only if the capital is deployed to eventually produce goods and services that are valued by the market. When the nexus between the mobilization of capital and the productive use of capital is broken, the returns cannot be sustained – the bubble must eventually burst, with painful consequences. In this crisis, both conventional and Islamic financial markets have been affected, but the restrictions on the use of leverage and speculation has put Islamic Finance in a better stead.
Ladies and Gentlemen, Given the strong progress to date and the positive economic environment, I am confident that the Malaysian takaful operators will continue to make significant strides in becoming world-class players. In the process, this will strengthen the positioning of Malaysia as an international Islamic financial centre. On this note, I wish to congratulate Prudential Corporation Holdings Limited and Bank Simpanan Nasional on the occasion of the official launch of Prudential BSN Takaful Berhad. I wish Prudential BSN Takaful Berhad every success in achieving its objectives. Akhir kata, dengan lafaz Bismillahir Rahmanir Rahim, saya dengan sukacitanya merasmikan pelancaran Prudential BSN Takaful Berhad. Terima kasih. 2  BIS Review 73/2006