In practice, an essential objective of the new approach is to put an end to the situation in which, as a result of public intervention, bank liabilities are not, de facto, subject to the usual loss absorption hierarchy applied to bankruptcy events under commercial legislation. In other words, a resolution action taken in anticipation of an otherwise unavoidable liquidation of a credit institution should not imply a general bail-out of that bank’s creditors. With these generally accepted objectives in mind, a consensus has emerged for the development of international standards for banking resolution – mostly at the Financial  BIS central bankers’ speeches  1  Stability Board level – which are now being gradually incorporated into domestic legislation around the globe. One relevant matter in the ongoing discussion on the specifications of the resolution regime is the scope of bail-in arrangements, i.e. under what conditions and to what extent will banks’ creditors be obliged to bear losses of banks under resolution. A specific issue that has attracted much discussion is the treatment of uninsured deposits and senior debt instruments. Some support has been expressed for the argument that a stringent approach to bail-in arrangements would de facto affect a bank´s ability to attract stable funding sources at reasonable prices. However, the counterargument appears quite convincing: the ability of banks to issue senior debt or to attract depositors should not be based on an implicit public guarantee beyond that provided by the deposit guarantee scheme.
The asset-backed nature of Islamic finance makes sukuk ideal for financing of infrastructure projects and would complement ongoing work by Singapore to enhance the bankability of infrastructure projects in the region and involve more capital market participants. 13. In the meantime, it will be important to continue to strengthen key foundations such as global regulatory standards and best practices for Islamic finance, and capacity building and talent development. To facilitate further growth of Islamic finance in Singapore, MAS is working with the industry and other government agencies to provide clarity and certainty in the regulatory and tax treatment for sukuk. For example, some industry players have suggested that pre-approved standardised templates for common sukuk structures could be introduced to expedite issuance. 14. Building Islamic finance expertise has also been highlighted as crucial to supporting the continued growth of the industry. The Singapore Management University’s (SMU) International Islamic Law and Finance Initiative is now in its 6th year, and seeks to carry out research and develop thought leadership in Islamic law and finance, in collaboration with institutions in UK, Malaysia and Indonesia. SMU also offers a Masters in Islamic Law and Finance, and will be graduating its third cohort of students this year. In addition, Islamic finance has also been included as an eligible subject area under MAS’ Finance Scholarship Programme, and industry players could look to tap on this scheme to groom promising talent. Conclusion 15. To conclude, the deepening linkages between Asia and Middle East will continue to present significant opportunities for Islamic finance.