Post by Shaheen on Jun 15, 2011 7:10:45 GMT 4
The First Lady of Islamic Finance
The first female central banker in Asia, Dr Zeti Akhtar Aziz has been a key player in the global development of Islamic finance for more than a decade
Tan Sri Dato' Sri Doctor Zeti Akhtar Aziz is Governor of Bank Negara Malaysia, the Central Bank of Malaysia. She was reappointed Governor for a further five year term with effect from 1 May 2011 by His Majesty the Yang di-Pertuan Agong. Dr Zeti has held the position of Governor of the Central Bank since May 2000.
Married with two children, she was born on 27 August 1947; she is the daughter of Royal Professor Ungku Aziz Ungku Abdul Hamid, a former vice chancellor of the University of Malaya and one of Malaysia's leading intellectuals. Dr Zeti studied economics at the University of Malaya graduating with honours and has a Masters and PhD from the University of Pennsylvania in the US.
Her career took her from the South-East Asian Central Bank Research and Training Centre (attached to the International Monetary Fund and the World Bank) to Bank Negara Malaysia. She was appointed Acting Governor on 1 September 1998, at the peak of the Asian financial crisis. She then held the post of Deputy Governor for two years.
Governor Zeti led the Steering Committee for the establishment of the Islamic Financial Services Board (IFSB) in November 2002 and later served a term as Chair of the IFSB Council. In this first part of our two-part review of her role in Islamic finance we review her comments at the 8th Islamic Financial Services Board Summit in Luxembourg on 12 May 2011. Part two will feature an in-depth interview with her.
DECADE OF GROWTH
Reviewing the growth of Islamic finance over the last decade, Governor Zeti said, "Since the turn of the millennium, the internationalisation of Islamic finance has accelerated. Its internationalisation is manifested by the increased presence of Islamic financial institutions in new jurisdictions, the increased international participation in Islamic financial markets and the increased cross border flows that are Shari'ah compliant. Today, there are more than 600 Islamic financial institutions that operate in more than 75 countries.
"THE FULL ADOPTION OF IFSB STANDARDS WILL ELIMINATE THE OPPORTUNITY FOR REGULATORY ARBITRAGE"
"The increasing internationalisation of Islamic finance has to a significant extent been facilitated by the expansion of the operations of Islamic financial institutions beyond their domestic borders, motivated by the search for new growth opportunities. In addition to the increased interconnectedness of Islamic financial markets, this trend calls for greater cooperation among supervisors to ensure the financial stability of the Islamic financial system.
"Whilst the growing internation-alisation of Islamic finance essentially reflects its ability to be competitive and its ability to meet the changing demands of businesses, its resilience has been important in supporting this trend. This resilience is essentially underpinned by two inherent strengths of Islamic finance. First, is its strength that is derived from the emphasis on having a close linkage between Islamic financial transactions and economic activity and from having built-in checks and balances which inherently make Islamic finance a stable form of intermediation. Second, are the initiatives that have been taken to strengthen the international infrastructure of Islamic finance to promote the sound and orderly development of Islamic finance."
SETTING THE STANDARDS
Governor Zeti went on to focus on the need for increased international cooperation, underlining its vital importance in ensuring the implementation of common prudential standards to safeguard the stability of the Islamic financial system. She said, "This will contribute towards the harmonisation of the regulatory and supervisory framework in Islamic financial systems across borders. Of importance is advancing the international standards and best practices that take into account the distinct characteristics of Islamic finance. Such prudential regulation that considers the unique mix of risks associated with Shari'ah-compliant financial business would enhance the effectiveness of the regulatory outcomes intended for Islamic finance."
The Governor believes that global cooperation and collaborative action is critical so as to ensure consistent implementation of the regulatory framework. "The full adoption of IFSB standards will eliminate the opportunity for regulatory arbitrage, in particular, regulatory arbitrage due to cross-sectoral differences, cross-border differences and the differences between conventional and Islamic finance. The more consistent implementation of these standards will also ensure greater certainty in the regulatory treatment of Islamic financial transactions, thereby enabling comparability among institutions as well as surveillance by regulatory authorities. This harmonisation will not only contribute towards global financial stability, but will also promote greater transparency across borders."
Addressing the issues that implementing these standards could raise, Governor Zeti added, "Technical cooperation programmes can be developed and designed for both ex-ante and ex-post implementation of the IFSB standards. In the pre-implementation period, structured technical programmes can be tailored to individual countries to enhance jurisdictional preparedness in adopting the standards if so required. Similarly in the post-implemention period, a framework for self-assessment can be developed to assess jurisdictional effectiveness in implementing the IFSB standards. These developments would potentially lead to the inclusion of the IFSB standards and rules for adherence and implementation across jurisdictions, along with the core principles and standards of the Basel Committee, IAIS and IOSCO within the context of the IMF-World Bank Financial Sector Assessment Program."
INTEGRATED FRAMEWORK
Looking ahead to the next decade of growth in Islamic finance, Governor Zeti called for 'a more structured framework for collaboration among supervisors'. She said this would enhance supervisory informational efficiencies, and ultimately, contribute to an effective assessment and early detection of any cross-border risk-transmissions from group-wide activities.
She suggested that regulators should establish an integrated framework of macro surveillance for Islamic financial activities across jurisdictions. "The global database for prudential Islamic finance statistics to be initiated by the IFSB, would therefore need to go far beyond ensuring standardised data collection among jurisdictions, but also to enable the generation of various macro and financial indicators, and global sharing of best practices in macro surveillance."
As well as looking forward, Governor Zeti also looked back, describing the first decade of the new century as 'a defining era in the evolution of Islamic finance'. She said, "It has been characterised by rapid global expansion and increased internationalisation. Of importance is that these trends have been supported by significant actions taken to strengthen the foundations of the international Islamic financial system involving the development of important international institutional arrangements and mechanisms. These tremendous achievements have been the outcome of strong cooperation and collaboration among the central banking community from both Islamic and non-Islamic countries."
The first female central banker in Asia, Dr Zeti Akhtar Aziz has been a key player in the global development of Islamic finance for more than a decade
Tan Sri Dato' Sri Doctor Zeti Akhtar Aziz is Governor of Bank Negara Malaysia, the Central Bank of Malaysia. She was reappointed Governor for a further five year term with effect from 1 May 2011 by His Majesty the Yang di-Pertuan Agong. Dr Zeti has held the position of Governor of the Central Bank since May 2000.
Married with two children, she was born on 27 August 1947; she is the daughter of Royal Professor Ungku Aziz Ungku Abdul Hamid, a former vice chancellor of the University of Malaya and one of Malaysia's leading intellectuals. Dr Zeti studied economics at the University of Malaya graduating with honours and has a Masters and PhD from the University of Pennsylvania in the US.
Her career took her from the South-East Asian Central Bank Research and Training Centre (attached to the International Monetary Fund and the World Bank) to Bank Negara Malaysia. She was appointed Acting Governor on 1 September 1998, at the peak of the Asian financial crisis. She then held the post of Deputy Governor for two years.
Governor Zeti led the Steering Committee for the establishment of the Islamic Financial Services Board (IFSB) in November 2002 and later served a term as Chair of the IFSB Council. In this first part of our two-part review of her role in Islamic finance we review her comments at the 8th Islamic Financial Services Board Summit in Luxembourg on 12 May 2011. Part two will feature an in-depth interview with her.
DECADE OF GROWTH
Reviewing the growth of Islamic finance over the last decade, Governor Zeti said, "Since the turn of the millennium, the internationalisation of Islamic finance has accelerated. Its internationalisation is manifested by the increased presence of Islamic financial institutions in new jurisdictions, the increased international participation in Islamic financial markets and the increased cross border flows that are Shari'ah compliant. Today, there are more than 600 Islamic financial institutions that operate in more than 75 countries.
"THE FULL ADOPTION OF IFSB STANDARDS WILL ELIMINATE THE OPPORTUNITY FOR REGULATORY ARBITRAGE"
"The increasing internationalisation of Islamic finance has to a significant extent been facilitated by the expansion of the operations of Islamic financial institutions beyond their domestic borders, motivated by the search for new growth opportunities. In addition to the increased interconnectedness of Islamic financial markets, this trend calls for greater cooperation among supervisors to ensure the financial stability of the Islamic financial system.
"Whilst the growing internation-alisation of Islamic finance essentially reflects its ability to be competitive and its ability to meet the changing demands of businesses, its resilience has been important in supporting this trend. This resilience is essentially underpinned by two inherent strengths of Islamic finance. First, is its strength that is derived from the emphasis on having a close linkage between Islamic financial transactions and economic activity and from having built-in checks and balances which inherently make Islamic finance a stable form of intermediation. Second, are the initiatives that have been taken to strengthen the international infrastructure of Islamic finance to promote the sound and orderly development of Islamic finance."
SETTING THE STANDARDS
Governor Zeti went on to focus on the need for increased international cooperation, underlining its vital importance in ensuring the implementation of common prudential standards to safeguard the stability of the Islamic financial system. She said, "This will contribute towards the harmonisation of the regulatory and supervisory framework in Islamic financial systems across borders. Of importance is advancing the international standards and best practices that take into account the distinct characteristics of Islamic finance. Such prudential regulation that considers the unique mix of risks associated with Shari'ah-compliant financial business would enhance the effectiveness of the regulatory outcomes intended for Islamic finance."
The Governor believes that global cooperation and collaborative action is critical so as to ensure consistent implementation of the regulatory framework. "The full adoption of IFSB standards will eliminate the opportunity for regulatory arbitrage, in particular, regulatory arbitrage due to cross-sectoral differences, cross-border differences and the differences between conventional and Islamic finance. The more consistent implementation of these standards will also ensure greater certainty in the regulatory treatment of Islamic financial transactions, thereby enabling comparability among institutions as well as surveillance by regulatory authorities. This harmonisation will not only contribute towards global financial stability, but will also promote greater transparency across borders."
Addressing the issues that implementing these standards could raise, Governor Zeti added, "Technical cooperation programmes can be developed and designed for both ex-ante and ex-post implementation of the IFSB standards. In the pre-implementation period, structured technical programmes can be tailored to individual countries to enhance jurisdictional preparedness in adopting the standards if so required. Similarly in the post-implemention period, a framework for self-assessment can be developed to assess jurisdictional effectiveness in implementing the IFSB standards. These developments would potentially lead to the inclusion of the IFSB standards and rules for adherence and implementation across jurisdictions, along with the core principles and standards of the Basel Committee, IAIS and IOSCO within the context of the IMF-World Bank Financial Sector Assessment Program."
INTEGRATED FRAMEWORK
Looking ahead to the next decade of growth in Islamic finance, Governor Zeti called for 'a more structured framework for collaboration among supervisors'. She said this would enhance supervisory informational efficiencies, and ultimately, contribute to an effective assessment and early detection of any cross-border risk-transmissions from group-wide activities.
She suggested that regulators should establish an integrated framework of macro surveillance for Islamic financial activities across jurisdictions. "The global database for prudential Islamic finance statistics to be initiated by the IFSB, would therefore need to go far beyond ensuring standardised data collection among jurisdictions, but also to enable the generation of various macro and financial indicators, and global sharing of best practices in macro surveillance."
As well as looking forward, Governor Zeti also looked back, describing the first decade of the new century as 'a defining era in the evolution of Islamic finance'. She said, "It has been characterised by rapid global expansion and increased internationalisation. Of importance is that these trends have been supported by significant actions taken to strengthen the foundations of the international Islamic financial system involving the development of important international institutional arrangements and mechanisms. These tremendous achievements have been the outcome of strong cooperation and collaboration among the central banking community from both Islamic and non-Islamic countries."