There is a need of structural reforms that can assist reducing pro-cyclicality in the financial system and make it more resilient to the external shocks, according to Dr. Erdem Basci, Governor of the Central Bank of Republic of Turkey.
He also stressed the need for making the financial system more inclusive to provide an avenue for better income and wealth distribution in the economy.
The 9th Annual Summit of the Islamic Financial Services Board (IFSB) was held in Istanbul, Turkey this month and hosted by the Central Bank of the Republic of Turkey (CBRT).
The Summit theme, ‘Global Financial Reforms: The Changing Regulatory Model and Islamic Finance’, was as timely as it was pertinent, especially in the presence of prominent international and local delegates and at a time of turmoil in the Developed and Eurozone economies and financial markets.
Jaseem Ahmed, Secretary-General of the IFSB, in his opening speech, maintained that the further expansion of the Islamic finance industry will add to the diversity and hence the stability of the global financial system. The IFSB launched a new medium term strategy for the period 2012-2015, the Strategic Performance Plan (SPP) in March 2012 that will focus on strengthening the stability and resilience of Islamic finance; broadening the range of cross-sectoral prudential and supervision standards and guiding principles including capital markets and Takaful; educating its stakeholder community about its work and standards so as to support the adoption and their implementation; and the launching of a revised ’10-year Framework and Strategies for the Development of the Islamic Financial Services Industry’.
Dr. Mahmoud Mohieldin, Managing Director of the World Bank, in his keynote address, stressed the need for a strong regulatory oversight for Islamic financial services industry and related capacity building including a need for uniform enforcement of key rules and guidelines across boundaries. He warned against any complacency stressing that despite the remarkable expansion of the Islamic finance industry, it remains a relatively small one accounting for a mere 1 percent of global financial assets. Dr. Mohieldin reaffirmed the World Bank’s commitment to play a positive role in the growth of the Islamic finance industry which focuses primarily on knowledge sharing, support for the development of standards and rules, and executing transactions through its financing programmes.
Another important speech came from Dr. Cevdet Yilmaz, Minister of Development of Turkey, who stressed that it might be a long time to overcome the underlying causes of the financial crisis. He cautioned that a financial system that is divorced from the real economic sector will prove to be more vulnerable to systemic shocks. He also noted that Ankara has plans to transform Istanbul into a leading regional and international financial centre, offering a diverse range of financial services and products, including Islamic finance.
William Coen, Deputy Secretary-General of the Basel Committee on Banking Supervision, Bank of International Settlements (BIS), discussed the progress of Basel III and Basel’s strength as a rule-making body that has been successful in reaching agreement on implementation of these rules, especially on capital framework and risk management, through joint voluntary measures, and also serving as a platform for cooperation and sharing of experiences between supervisors and regulatory authorities.