THE recent Meeting of Central Banks and Monetary Authorities of the Organisation of Islamic Cooperation (OIC) member countries was quite a challenging one.
This was because the meeting , which was held at Sasana Kijang, was held at a time when the world was in financial dire straits coupled with the eurozone’s worsening debt crisis.
Sasana Kijang is Bank Negara’s newly-established centre for excellence in knowledge and learning in central banking and financial services as well as for the promotion of regional and international collaboration.
The governors of the central banks of the OIC member countries had to deal with various financial issues and tackle solutions that could mitigate the threat of the global financial crisis.
Turkey’s central bank governor Erdem Basci speaking as Zeti listens at one of the press conferences. – Reuters
Various aspects of Islamic finance was discussed and how it could be adopted by central bankers’ in maintaining the stability of their financial system and avert another round of financial meltdown since the last one sparked by the subprime mortgage crisis.
Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said the gathering of practitioners from the international financial community was timely in light of the continued growth of Islamic finance in the current highly challenging international financial environment.
She added that Islamic finance continued to expand, facilitating greater economic and financial linkages between Asia, the Middle East and other emerging economies. Zeti said this at the fifth annual Islamic Financial Intelligence Summit organised by The Banker Magazine and Financial Times. The event was one of the series of OIC events held in conjunction with the meeting.
The global Islamic finance industry continued to chart double-digit growth of 21%, with the syariah compliant assets now breaching the US$1 trillion mark.
The other events comprised the annual Experts’ Group Workshop and the Governors’ Meeting of Central Banks and Monetary Authorities.
Organised in collaboration with the Statistical, Economic, Social Research and Training Centre for Islamic Countries (Sesric), the OIC series was held for four days from Nov 14-17 and was attended by top dignitaries and central bankers.
Among the dignitaries who attended the OIC Central Banks and Monetary Authorities meeting were Central Bank of Bahrain governor Rasheed Mohammaed Al Maraj, Central Bank of Turkey governor Dr Erdem Basci, Central Bank of UAE governor Sultan bin Nasser Al-Suwaidi, State Bank of Pakistan governor Yaseen Anwar, Sesric director-general Dr Savas Alpay and OIC Secretariat director of economic affairs department Gholam Hossein Darzi.
The theme of the meeting this year was Central Banking and Financial Sector Development, which covered the framework for central bank and sound financial sector development that would support and catalyse sustainable economic growth in developing economies.
In her keynote address entitled “The New Islamic Finance Landscape”, Zeti said a central aspect of the new Islamic financial landscape was the increased focus on financial stability, adding that this would enhance its potential as a form of financial intermediation amid an increasingly more challenging environment.
Zeti said the increased focus on financial stability had several implications for the new financial landscape, of which, the most significant would be the fundamental changes in the regulatory environment.
She said much progress had already been made by the Islamic Financial Services Board (IFSB) in promulgating an extensive set of prudential standards for the Islamic financial services industry since its establishment in 2002.
The IFSB, she said, had already introduced standards for capital adequacy, risk management, corporate governance and syariah governance which were significant in promoting international uniformity of the regulatory framework and international best practices for the Islamic financial system in different jurisdictions.
At the meeting, the central bank governors and head of delegations agreed that emerging economies would continue to contribute towards driving global economic recovery and growth as well as the potential role of Islamic finance in supporting this endeavour be given special attention.
They also affirmed to leverage on individual strengths and cooperate in building capacities, including the training programmes organised by Sesric for central banks of the OIC member countries.
Meanwhile, in a separate statement, the council of the IFSB has announced the appointment of the central bank governor of Bahrain Rasheed Mohammed Al Maraj as its council chairman effective January 2012 and Qatar central bank governor Sheikh Abdullah Saoud Al-Thani would be deputy chairman.
Catholic University of Argentina professor of international economics Martin Redrado, who was also former governor of the central bank of Argentina, spoke on capital flow into emerging markets.
He said the treasury and central banks in these markets should coordinate the intervention mechanisms and resources to deal with capital flows in order to minimise volatility in the domestic financial markets and avoid threats to financial stability.
“Building liquidity buffers, including foreign reserve accumulation and the development of a highly liquid and solvent financial system is an effective tool for emerging markets to withstand the increased volatility of capital flows,” he said.