When serious problems emerge, however, there is a demand for new ideas and new ways of doing things: the status quo becomes unacceptable. Of course, the same scenario has applied to the regulatory framework more broadly. Precrisis, any call for stronger capital and liquidity rules was generally howled down as burdensome and unnecessary. Post-2008, the costs of a weak regulatory framework have been all too obvious and painful for the banking sector, and as a result the demand for new ideas was immediate and forceful. My theme for today is that successful regulatory reform is about ideas and implementation. Certainly, we needed to rethink the regulatory framework in light of what we have learnt from the past five years – the status quo was not acceptable. But if we want to be successful, the Committee also needs to make sure that the ideas we developed into Basel III are truly put into practice. From ideas …. The Basel Committee’s response to the financial crisis was to recognise that policy weaknesses contributed to the excesses that built up in the financial sector. A substantial overhaul was necessary: minor adjustments to the framework were not going to be enough. We needed some big, new far-reaching ideas.
It can also be enhanced to become a multi-currency investment platform to provide a marketplace for local and international investors to invest in real economic activity and projects denominated in various currencies and financed by Islamic banking institutions from different jurisdictions. This will be a first of its kind shared global platform for Islamic finance. In facilitating cross-border transactions, the IAP will also contribute towards drawing new foreign investors while also allowing for participation in the financing of projects outside the country. The IAP, together with the existing components of financial intermediation will form a more complete, and yet mutually complementary financial ecosystem. To ensure its success, there has to be greater awareness and understanding on the key features of the IAP and its embedded mechanisms by all the stakeholders. Of importance is for Islamic banks, investors and entrepreneurs to have a clear understanding on the risk and return relationships that are embedded in the variations of Shariah contracts used in such investment account products. Expectations need to be aligned with the various approaches adopted to managing these relationships according to the contractual and operational requirements. It is also paramount for Islamic banks to uphold the best practices in the conduct of discharging their fiduciary duties and in performing its administration. Of importance is the required due diligence, performance monitoring, suitability assessment and investment management. This would ensure that the IAP is always a trusted medium of investment that is transparent and competitive in providing a seamless experience for investors.