The approach for the implementation of the action plans outlined  BIS Review 49/2005  1  in a Master Plan needs to be done in an iterative manner, taking into account the potential for change that may occur in both the domestic and external environment. The Master Plan will also identify the building blocks of the various parts of the financial sector that need to be put in place to provide the foundation on which further progress can be built. The Financial Master Plan thus provides the sequencing of priorities and identifies the key financial infrastructure that needs to be put in place before advancing forward. In some areas, the implementation can be simultaneous, while in others a more direct route can be taken to enable a more rapid pace of development. In designing and formulating the Master Plan, consideration needs to be given to the diversity of the member countries of the IDB. The member countries are at various stages of economic development, facing different economic and financial challenges, and with different development priorities. The Master Plan aims to highlight the approaches, templates and building blocks that can be adopted at the different stages in the development of a comprehensive Islamic financial system. A phasedapproach would provide the Master Plan with the flexibility to take into account the different stages of economic development of respective countries. While the starting points may differ, countries may adapt the approaches to their requirements and that is commensurate with their stage of development.
Real effort is needed to try to understand the dynamics of collective, and sometimes irrational behaviour of firms, their clients and counterparties - particularly behaviour that could lead to one-way markets. In a downward market they can be the scourge of stability and destroyer of liquidity. 3. Financial stability and public policy  The business of oversight of, and possible intervention in, the financial system falls to public authorities. The justification for this involvement is accepted by all but the freest of free marketers. 1  Raymond Goldsmith, Comment on Hyman Minsky’s “The Financial Instability Hypothesis: Capital Processes and the Behaviour of the Economy” in C P Kindleberger and J-P Laffargue Eds, Financial Crises: Theory, History and Politics. Cambridge University Press (1982). BIS Review 5/2004  1  Financial stability can be looked on as a public good. And the costs to society of crises and instability can go well beyond the cost borne by players within the financial services arena itself. Not only is it important in providing an effective monetary transmission mechanism, but collapse and instability can lead to decline in aggregate demand and a rise in unemployment. Research suggests that the average cumulative output loss of a banking crisis in an emerging market economy is nearly 14% of GDP, and up to 25% in developed countries.2 The roles and aims of the public authorities - a combination of supervisors, central banks and government - embrace two interdependent fields.