Zeti: Need for stable financial systems

Wednesday October 7, 2009
Zeti: Need for stable financial systems


ISTANBUL: There is an urgent need to find an enduring solution to ensure the stability of financial systems, said Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz.

She said the challenge was to build a new financial architecture that would allow for more efficient financial intermediation not only within national economies but also across borders.

“Islamic finance, with its emphasis on a strong linkage to productive economic activity, its in-built checks and balances and its high level of disclosure and transparency, offers this prospect.

“Indeed, inherent in Islamic finance are the explicit elements that address several of the issues that have surfaced in the conventional financial system during the current crisis,” Zeti said on Monday at a seminar on Islamic Finance: During and After the Global Financial Crisis.

The seminar was jointly organised by the World Bank, the Islamic Financial Services Board, the Islamic Development Bank and the Institute of International Finance.

Zeti said the global dimension of the current crisis called for a higher degree of collective determination by the international community to work together towards developing a global strategy that would evolve a financial system that was stable and sustainable over the entire business cycle.

“As Islamic finance continues to become an integral part of the global financial system, it will increasingly be exposed to risks of financial stress arising from global financial instability and global economic activity,” she said.

She added that a greater global engagement among those that were driving the reform agenda was necessary, given that it would result in new structures, standards and regulatory regimes for the industry.

The Islamic financial industry had been able to weather the first wave of the global financial crisis, demonstrating its robustness as a stable form of financial intermediation, she said.