These insights from the crisis lie behind the regulatory work that is now underway in Sweden and abroad today. There is broad agreement that risk-taking in the banking sector must be limited and that its costs must be taken into account by the banks and their investors to a greater extent. Important steps have been taken in this direction in the global agreement on future standards for regulations in the banking sectors referred to as the Basel III Accord. The worlds’ banks will be safer when this is implemented, which will benefit everyone. Basel III increases the safety margins in the system The Basel III regulations represent the introduction of much-needed standards that will require the banks to hold more and better capital. The minimum requirement for CET 1 capital, that is share capital and retained earnings, will be raised to 4.5 per cent of the riskweighted assets. In addition to the minimum requirements there will be a capital-conservation buffer, a countercyclical capital buffer and a buffer for systemically-important banks, which all sharpen the requirements for the level of CET 1 capital. In total, the Basel III Accord will represent a capital-adequacy requirement of 7 to 12 per cent of CET 1 capital depending on how important the bank is in a global systemic perspective and where the country's economy is in the credit cycle. This is a much higher level than previously. The countercyclical capital buffer is particularly interesting.
The task force will provide recommendations including on developing the framework for prevention and management of crisis taking into account the lessons for reform of the international financial system. Thirdly, and importantly is that international integration of Islamic finance would be facilitated by the mutual recognition of financial standards and products across jurisdictions. In the area of Shariah, there has already been the progressive convergence of Shariah views and rulings, and the mutual recognition of financial standards and products across jurisdictions. As this continues to occur, it would be a major driver towards greater international financial integration. This convergence and harmonisation is taking place with the greater engagement among the regulators, practitioners and scholars in Islamic finance across jurisdictions. To promote greater mutual recognition of products, Bank Negara Malaysia has embarked on the initiative to develop the Shariah Parameters to promote more consistent application of Islamic financial contracts. This initiative aims to determine the essential features of Islamic financial products derived from underlying key Shariah principles. This is also to provide greater clarity to the international community thereby facilitating greater cross border transactions. An International Shariah Research Academy for Islamic Finance (ISRA) has also been established in 2008 to promote greater engagement among Shariah scholars from around the world and to undertake research activities and contribute towards a greater understanding and international convergence. In this respect, we welcome relevant British institutions to collaborate with I SRA to advance this endeavour.