SPEECH: Opening speech by Mr Jaseem Ahmed, Secretary-General of the IFSB at the 10th IFSB Summit
Date posted: 16 May 2013
Date: 16 May 2013
Event / Venue : 10th IFSB Summit | Kuala Lumpur, Malaysia
Speaker : Mr Jaseem Ahmed, Secretary-General, Islamic Financial Services Board
A. Introduction and Thanks
It is my honor to welcome you to the 10th Anniversary Summit of the Islamic Financial Services Board.
The theme of the Summit is The Future of the Islamic Financial Services Industry: Resilience, Stability and Inclusive Growth.
Ladies and Gentlemen, ten years is a very short time. The IFSB has faced and surmounted many challenges in that time. The most important challenge was to establish its international credibility as a standard setting institution, as an institution that is able to transform the principles for regulation and supervision of the financial system into standards applicable to the specific requirements and characteristics of Islamic finance.
This was the greatest challenge, but this is also where the IFSB has achieved its greatest success.
The IFSB has issued 19 high quality standards, technical and guidance notes that provide the basis for the orderly development of a broad based Islamic financial services industry.
The IFSB has also developed effective and cordial mechanisms for collaboration with its global counterparts, amongst whom are the Basle Committee for Bank Supervision and the International Association of Insurance Supervisors.
There are many other achievements and many people have contributed to them.
I would like to take this opportunity to thank some of them today. Chief amongst them are the Founding Members. We are privileged to welcome four of them today.
Their vision, which inaugurated the IFSB, is as compelling today as when they first enunciated it.
It was the Founders of the IFSB who made the decision to locate the IFSB here in Malaysia.
On behalf of the IFSB I would like to thank the people of Malaysia for their warmth and hospitality, and the Government of Malaysia for its support, a support which has enormously facilitated our work.
We have been fortunate in the level and quality of support provided by the Government of Malaysia, but we have also been fortunate in the support provided by our host institution, Bank Negara Malaysia.
I would like to address my special thanks, therefore, to Her Excellency, Tan Sri Dr. Zeti Akhtar Aziz, the Governor of Bank Negara Malaysia. Your enormous efforts on our behalf have sustained and helped to transform this institution. Thank you Governor, for your unstinting and steadfast support to the IFSB through the years.
Amongst the many others whose untiring efforts on our behalf has contributed to the achievements of the IFSB - are the members of its Technical Committee, and its various Working Groups, who have collaboratively drafted the IFSB’s standards and who have provided us with their invaluable insights, energy and uncompromising adherence to quality. I thank everyone, and thank you all.
It gives me great pleasure also to acknowledge the enormous contributions of my predecessor, Professor Datuk Rifaat Ahmed Abdel Karim, who served as the inaugural Secretary General of the IFSB from 2003 – 2011.Through his inspired leadership he has given to the IFSB its firm direction, and imparted to it a b ethic and adherence to the highest standards of professionalism.
We welcome you, Professor Rifaat, and thank you for gracing this occasion with your presence.
Ladies and Gentlemen, the themes of our Summit – resilience, stability and inclusion – are important features of the global policy debate at this time. They feature in policy discussions in the crisis countries, and they loom in increasing importance for Islamic finance. Policy makers and regulators are stressing the importance of inclusion and equitable growth to achieving economic and financial stability. In particular, regulators have recognized that financial exclusion can lead to financial instability, as well as to more broad based social and political instability.
Against this backdrop, Islamic finance is helping to advance a global debate on the kind of financial system that is appropriate in the post crisis world. Amongst the many features of Islamic finance, two that have especial relevance in this debate are the priority it places on ethical principles and on the requirement for a direct linkage between the financial sector and the real economy.
These aspects of Islamic finance are drawing the attention of policy makers in many countries that wish to stabilize their economies and financial systems - by drawing on features of Islamic finance as well as by promoting it as a means of diversifying their financial systems.
Another point of global interest is the expanding role that Islamic finance is playing through Sukūk in the cross border financing of investment in social and physical infrastructure. Through these investments Islamic finance is demonstrating that it can contribute strongly to inclusion by improving access to health, education, and housing for people across the world.
Ladies and gentlemen, the concept of inclusion is at the heart of what Islamic finance aims to achieve.
Indeed, it could be said that Islamic finance is inclusive finance.
However, the drive for inclusive growth through a well-functioning IFSI must be supported by a transparent legal and regulatory framework that incorporates the specific operational and risk characteristics of Islamic finance.
The IFSB is encouraged to see the strengthening of legal and regulatory frameworks that is taking place in many jurisdictions, and we welcome the progress in the implementation of IFSB standards. The IFSB is supporting this process through capacity building programs at both the country and regional levels. But it must do more, and it must acquire the resources to do so.
In welcoming the developments which contribute to the stability and resilience of the IFSI, and to its expanding relevance, the IFSB recognizes the broader and continuing challenge they pose for the institution.
This challenge is to widen the coverage of issues the IFSB addresses through its knowledge products and its technical advice, in a way that keeps pace with the needs of the global IFSI, and with the IFSB’s staff and institutional capabilities.
This is not an easy task, but we have brought to this challenge a systematic approach by identifying a set of medium term priorities through our Strategic Performance Plan that is now on our website.
Ladies and Gentlemen, allow me to touch on how we are addressing the key priorities.
First, we have initiated, jointly with the IDB and IRTI a mid-term review of the 10 Year Framework for Islamic finance. This will, we hope lead to an updated understanding and set of priorities to guide the global industry. A key focus of the Review is to examine how national strategies for Islamic finance can support cross border objectives such as the integration of wider financial markets in Islamic finance.
Second, we have launched a working group for the preparation of a standard on Core Principles of Regulation in Islamic finance. This standard will also include an assessment methodology that will assist national regulatory authorities carry out self-assessments of the progress made in the development of their regulatory frameworks and in their implementation of IFSB standards.
The IMF and Basel Committee are members of this important working group.
This is an important initiative, and it reflects the views of the IFSB’s members who have stressed the need for guidance to help achieve greater consistency and focus of implementation efforts. The Core Principles will represent a major step towards integrating Islamic finance into the global economy and into the global surveillance system that is used to monitor stability and resilience.
Third, the IFSB’s research program and its use of surveys are playing an important role in elucidating issues and in identifying existing practices in our member jurisdictions. The important 2011 Survey of Implementation provided us with data on the progress made in implementation and on the kinds of assistance needed to overcome existing impediments to improve progress.
We will be carrying out a follow-up survey on implementation in 2013, and we further plan to make this Survey a permanent feature of the IFSB operations. Our capacity building programs will be aligned with the results of this survey in order to provide targeted support to our member jurisdictions of whom 19 have indicated to us their plans to progressively implement the IFSB standards over the medium term.
Finally, the IFSB has launched a program to deepen its engagement with its members and with the global IFSI. Our membership, which includes regulatory bodies, multilateral institutions, and market players is a unique source of strength for the IFSB. Our members enrich our understanding of what is important in Islamic finance and contribute to our ability to remain relevant.
A key aspect of the engagement with our members is our research and survey results, which we will share with our stakeholders on a regular basis with a view towards an enhanced dialogue, and a common appreciation of key issues, impediments and challenges.
In this connection, the IFSB has just released its Islamic Financial Services Industry Stability Report 2013, where we report on the state of Islamic finance globally, while also providing an assessment of the progress made in implementing the infrastructure for stability of financial markets and financial systems.
In addition the Stability Report addresses the issue of inclusion and how this goal is served by Islamic finance through the provision of Islamic microfinance and related initiatives.
Let me now draw my remarks to a close with the following observations.
The establishment of the IFSB was the result of the leadership and vision of our Founders. They were committed to the emergence of a vibrant Islamic finance industry as a means of achieving more prosperous and equitable societies in which risks were better diversified and shared.
In particular, the Founders saw the need for an international institution – the IFSB – that would promote the harmonization and standardization of regulatory approaches to boost the Islamic finance industry and to provide it with a level playing field within the global economy.
In line with this vision, the IFSB’s Surveys and research results indicate that national supervisory practices, supported by IFSB standards, have made significant progress in reflecting the risk characteristics of Islamic finance.
But many challenges remain, including in the progressive completion of a supervisory system and supporting financial infrastructure that fully reflects the cross sectoral aspects of Islamic finance. There is in addition the continuing need for a systemic liquidity management infrastructure that would help to strengthen risk management capabilities at the level of financial institutions as well as at the macroeconomic level.
In addressing these and other issues, the IFSB’s overarching function has been to facilitate - and to sharpen - the regulatory and strategic focus on the needs of the IFSI.
This strategic focus has helped to accelerate financial innovations and growth of the industry -while also serving to improve resilience through stronger and more flexible systems of supervision and regulation.
These are significant achievements to take forward as we face the future.
The first decade has been challenging, to say the least. We cannot be assured that the next decade will be less challenging than the first.
We hope to rise to the new challenges – whatever the form they take - with your support, and with the support of our members and broader global stakeholders.
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