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Sunday, 24 February 2008

Zeti: Islamic finance can withstand global stress

TOKYO: The Islamic finance industry faces challenges from international market turmoil, but Malaysia's past experience points to its resilience to stress in global markets, Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said yesterday.
“We are pleased to report that the Islamic financial system demonstrated its resilience to the stress that occurred 10 years ago during the financial crisis,” Zeti said in a speech at an Islamic finance symposium here.
“We will make every effort to ensure not only the soundness and stability of Islamic finance but also its resilience in an environment of financial stress,” she added.
Zeti was responding to a remark by Bank of Japan (BoJ) governor Toshihiko Fukui who told the same seminar that the rapidly growing modern Islamic finance industry had not been fully tested by serious stress in the international markets.
“Stress tolerance can only be acquired through the experience of riding out numerous crises in the financial market and financial system,” Fukui said, adding that he would closely watch the developments in Islamic finance in this regard.
Fukui added that understanding the flow of Islamic finance capital originating from oil money had become important when considering sustainability of the global economy.
The development of Islamic finance brings diversity to financial markets and transactions, boosting business opportunities and providing a positive impact on the economy through more efficient resource allocation, he added.
There has been growing interest in Islamic finance in Japan, but the participation by Japanese financial institutions in Islamic finance business is still at an initial stage partly due to regulatory obstacles.
The Japan Bank for International Cooperation is set to issue the first Islamic bonds, or sukuk, in Malaysia soon.
The BoJ joined the Islamic Financial Services Board, an international body setting standards for Islamic finance, as an observer member last year in a bid to learn more about Islamic finance. – (Reuters)

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