In Malaysia , such markets exist and have been key to facilitating liquidity management. Coordinated initiatives across jurisdictions can be taken to foster the development of an efficient and vibrant international Islamic financial market. The IFSB Task Force on Liquidity Management reflects a concerted effort to explore measures needed to develop the liquidity management infrastructure and framework for the Islamic financial institutions. Notwithstanding the effort by the Task Force to look into the pertinent issues, Islamic financial institutions are encouraged to promote innovation in the development of a broader range of Islamic financial market instruments. These include instruments with equity ownership features, Islamic asset-backed securities, the inclusion of permissible forms of credit enhancements as well as Shariah-compliant risk mitigating instruments. It is also essential that there should be sufficient availability of liquidity to support the intermediation of funds in the Islamic financial system. Central banks must therefore have sufficient Islamic financial instruments at their disposal to manage the liquidity conditions in the Islamic financial system. Secondly, is the international cooperation to ensure financial stability of the international Islamic financial system. This will also involve partnerships between international financial centres in promoting financial stability. A robust and effective regulation and supervision of Islamic financial institutions is key to preserving financial stability. The current ongoing  2  BIS Review 86/2009  global financial and economic crisis has highlighted the structural weaknesses in the global financial regulatory and supervisory framework.
Malaysia has developed a comprehensive Islamic finance industry founded on a strong legal and regulatory framework, with a diversified number of Islamic banking and takaful institutions and a well-developed Islamic money and capital market. Today, Islamic financial assets comprise 17 per cent of the total assets of the banking system in Malaysia and the daily average volume transacted in our Islamic money market is RM6 billion. The sukuk market which has been expanding at an average annual rate of 22%, now accounts for more than 50% of our bond market. BIS Review 86/2009  1  With this financial infrastructure in place, Malaysia has recently intensified its pace of liberalisation. In April, the government announced further liberalisation measures that included new licences to be offered in Islamic banking and takaful. More specifically, up to two new mega Islamic banking licences will be issued to foreign players with minimum paid up capital of USD1 billion to enhance global interlinkages and leverage on global developments in Islamic finance. Existing domestic Islamic banks that wish to scale up their operations and expand into global markets are also given greater flexibility to enter into strategic partnerships with foreign players to raise their capitalization to USD1 billion with a higher foreign equity limit of up to 70%. In addition, up to two new family takaful licences will be issued in 2009 to players that can offer significant value propositions to Malaysia to spur the development of the takaful industry.