At the same time, it is also an effective instrument used by corporations, institutions and sovereigns in tapping funds at competitive rates to finance long term funding needs. At this juncture, the demand for sukuk is tremendous. The high demand for the sukuk instrument is evidenced by the over subscription which has ranged from two to thirteen times. This has pushed down the cost of issuance by at least 10 to 20 basis points. 2  BIS Review 6/2008  This demand has originated from several different parts of the world, both from conventional as well as Islamic financial investors. Due to the scarcity of sukuk issuance, the investors have tended to hold the sukuk for investment thereby reducing the secondary activity in the market. Thus, has resulted in a higher pricing in the sukuk secondary market thereby generating good investment returns for investors. The sukuk thus offers a positive value proposition for both issuers and investors. Let me turn to Malaysia's experience in Islamic finance. Malaysia has had three decades of experience in which we have developed a comprehensive Islamic financial system that operates in parallel to the conventional system. The supporting legal framework includes a dedicated legislation that takes into account the unique principles of Islamic contracts. The legal infrastructure also includes the court system and arbitration mechanism to resolve disputes to ensure that contracts relating to Islamic financial transactions are effectively enforced.
The primary criteria of the AMA could be summarized as falling into three broad areas: first, the development of strong corporate operational risk governance and management structures - structures that include business line integration into a firm-wide process; second, the incorporation of qualitative factors such as control self-assessments into the overall capital measurement process; and finally, loss data quantification, which includes scenario analysis. Our review of those major U.S. banks that intend to adopt the AMA indicates they are clearly in various stages of preparation. However, most of these institutions already have in place, or are well along towards establishing, a corporate level operational risk management function, with firm-wide policies for managing and assessing this risk. Moreover, many firms already have in place good, and improving, firm-wide control self-assessment methodologies. Finally, an increasing number of banks are now turning their attention to collecting internal loss data in a consistent manner across the firm. Some have already been collecting such data for a year or two and some have been particularly effective at mining their existing historical loss experience for certain risk types. A few leading institutions have made real progress in pulling all this together - by piloting operational risk quantification methodologies that combine the quantitative and qualitative elements of the AMA into an overall economic capital assessment for operational risk.