In view of these developments and considering that the amendments to the General Banking Law announced this year by the Ministry of Finance will include a review of the solvency requirements, making them gradually converge to the new Basel III capital standards, it is important that the banks strengthen their capital levels, for example by adjusting their profit reinvestment policies. The stress tests that we perform for each Financial Stability Report indicate that our capital levels are adequate to absorb the occurrence of a severe stress scenario. This scenario has similar characteristics to the one evaluated in the previous FSR, as it considers a fall in GDP in the short term and slower growth in the medium term. Output would stand at –4.5 percent annually during the most critical quarter and would then converge to a growth rate of 1.4 percent by the end of 2017. This is intended to replicate past financial fragility episodes of importance. The results of these stress tests show that the banking system’s position is adequate to deal with a severe stress scenario. They mark a downturn from the past FSR, mainly because of a lower level of initial capitalization and profitability, affected by reduced operating margins consistent with the evolution of the business cycle (figure 16). Let me close with some final thoughts. Final thoughts The economic situation has become more complex, especially in emerging markets. The terms of trade have fallen more than expected and financial conditions have tightened.
In view of the requirement for growth of Islamic financial transactions to be linked to real economic sectors, salient issues on stronger corporate governance and more efficient human resource management are discussed in a pre-concluding chapter of the book. Renowned industry practitioners and academicians have contributed to the book, providing deep insights, perspectives and views that are supported by practical experiences which will be invaluable to those who wish to understand the critical regulatory issues in Islamic finance. Contributions by the two respected co-editors who have extensive knowledge on the subject and are internationally recognised for their academic publications on Islamic finance, completes the book as an indispensable reference for all. It is hoped that in addressing the implications of the recent global financial crisis on the regulation of Islamic financial services, this book will provide further clarity and understanding on the multi-dimensional goals of policymakers and regulators in ensuring that the resilience of the Islamic financial system and its core tennets are aligned with the evolving global regulatory developments. Let me take this opportunity to congratulate the two co-editors for their invaluable contribution in enriching the body of authoritative information on the regulation of Islamic finance. Thank you. 2  BIS central bankers’ speeches