The greater premium on strong fundamentals, policy coherence and predictability will likely remain. There will be no one right answer in managing the trade-offs that come with the changed environment, and adjustment will sometimes be difficult. We will undoubtedly experience further bumps in the road. The renewed volatility we saw last month is evidence enough of that. Yet, I think we can remain generally optimistic about the prospects for adjustment so long as market participants continue to appropriately discriminate across countries, rather than treating EMEs as a single group. Furthermore, many EMEs generally appear to be better equipped today to handle the Fed’s prospective exit from its exceptional policy accommodation than they were during past tightening cycles. This reflects the fundamental reforms that EMEs have put in place over the  4  BIS central bankers’ speeches  past 15 years, as well as the hard lessons learned from past periods of market stress. Among the positives are: •  The absence of pegged exchange rate regimes that often came undone violently during periods of acute stress;  •  Improved debt service ratios and generally moderate external debt levels;  •  Larger foreign exchange reserve cushions;  •  Clearer and more coherent monetary policy frameworks, supporting what are now generally low to moderate inflation rates;  •  Generally improved fiscal discipline; and  •  Better capitalized banking systems, supported by strengthened regulatory and supervisory frameworks.
It is also encouraging to note that rating agencies have come forward to formulate rating methodology and review for takaful operators. Third area relates to the need for joint effort to shape prudential rules for takaful. For the formulation of prudential standards, the setting up of the IFSB remained one of the landmark developments in this decade. Established in 2002, the IFSB's core role is to promote prudent, transparent and robust development of the Islamic financial services industry through the promulgation of international prudential standards that are consistent with the principles of Shariah. The IFSB provides the platform for cooperation among the regulators through meetings, conference and the setting-up of working groups that give  BIS Review 95/2007  3  opportunity for the regulators to discuss and exchange information on issues confronting Islamic finance. For takaful industry, two developments are relevant that are: i.  the issuance of Issues Paper jointly by IFSB and IAIS on the applicability of IAIS core principles to takaful, and  ii. the formation of a working group to formulate corporate governance standard for takaful industry. In view that the formulation of the IFSB standards involves consultation with IFSB members, I would like to call more takaful operators to be members of the IFSB so as to provide the opportunity for the players to be part of the official consultation procedure for IFSB and to make comments on draft IFSB standards.