Islamic Finance Needs To Be More Regulated

SINGAPORE, May 8 (Bernama) -- Islamic finance needs to be further regulated as it is now growing and becoming an increasingly important component in the international financial system, according to Bank Negara Governor Tan Sri Dr. Zeti Akhtar Aziz.
Despite the current challenging global financial environment, the growth momentum of Islamic finance had continued, she said when chairing a discussion on direction of regulatory policies at the 6th Islamic Financial Services Board (IFSB) Summit here today.
She said regulation issues had significantly now become the subject of world discussion in the current crisis, and in this context it was critical regulations that would ensure the soundness and stability of the Islamic finance system be developed.
Zeti said the recent G-20 Summit had also declared that it would continue to take action to strengthen, regulate and supervise the financial sector following the fallout in the global financial system.
She said the Islamic Development Bank and IFSB earlier this year had formed a high level Task Force on Islamic Finance and Global Financial Stability, which she chairs, to examine the key elements of Islamic finance that could contribute to its viability and resilience.
The task force would also "examine the building blocks in the development of the international financial architecture that would contribute to its resilience including issues relating to regulations and crisis management," she said.
Reminiscing on Malaysia's experience, Zeti said the country was saved from the financial crisis that hit Asia in the late 1990's because its financial system was more regulated than others.
She said there was no 'bursting of bubble' in the property asset markets as Malaysia had been placing greater emphasis on financial regulation prior to the crisis then.
"When the currency crisis happened and money depreciated, we were not highly indebted," she said stressing the importance of having good financial regulations.
She said the need for an effective regulatory supervisory framework for Islamic finance was critical as the rest of the world now was on transition towards consideration for more regulation. -- BERNAMA