In fact, there is relatively little empirical analysis regarding the role of Islamic banks in financial stability. Nevertheless, a working paper of the International Monetary Fund was published at the beginning of 2008. 5 The findings of this paper are to be viewed as preliminary. Nevertheless, it has the advantage of being, as far as I know, the first and, up to now, only cross-country empirical analysis of Islamic banks’ impact on financial stability. Even if the situation may in principle differ from country to country and even from bank to bank, the paper finds that: -  (i) small Islamic banks tend to be financially stronger than small commercial banks,  -  (ii) large commercial banks tend to be financially stronger than large Islamic banks,  -  (iii) small Islamic banks tend to be financially stronger than large Islamic banks. 5  “Islamic Banks and Financial Stability: An Empirical Analysis” Prepared by Martin Čihák and Heiko Hesse (January 2008). The analysis is based on evidence covering 77 Islamic and 397 comparable commercial banks in 18 banking systems with a substantial presence of Islamic banking, over the 1993-2004 period. BIS Review 118/2009  3  One of the plausible explanations given by the paper is that it is significantly more complex for Islamic banks to adjust their credit risk monitoring system as they become bigger. Given their limitations in standardisation in credit risk management, monitoring the various profitloss-arrangements rapidly becomes much more complex as the scale of the banking operation grows.
This evolutionary approach requires two things: first, a stable framework which provides certainty for the industry so that the accord is not a moving target; second, enough structured flexibility to be able to adapt to relevant changes in best practices. Schedule With the release of the three papers on unexpected losses, securitisation, and the recognition of operational risk capital across home and host jurisdictions, the Committee has come a long way toward resolving many of the most complicated issues raised in consultations. These revisions to the framework will, moreover, help to ensure that the New Accord is more sensitive to the actual degree of risk that banks face and even more supportive of future improvements in the measurement and management of risk. The Committee’s working groups are refining these and other technical matters in the New Accord and will report their solutions to the Committee by May 2004. That will allow the Committee to meet its goal of resolving outstanding issues by the middle of this year and agreeing on the text of the Accord that will provide a solid basis for national rule-making processes and for the industry’s preparations to continue. Concluding thoughts Over the next two days, you will have an opportunity to discuss and share ideas on the latest risk management practices in the areas of market, credit, operational, and insurance risk. A great deal of what you will discuss has direct relevance to developing and implementing advanced risk management techniques.