MALAYSIA, LONDON CAN BRIDGE ISLAMIC FINANCIAL MARKETS

KUALA LUMPUR, Feb 25 (Bernama) -- Malaysia and London can pave the way
towards bridging Islamic financial markets between the East and the West,
according to Central Bank of Malaysia's governor Dr Zeti Akhtar Aziz.

She said the global financial crisis had highlighted several structural
weaknesses and imbalances in the international financial system.

"Whilst Islamic finance is not insulated from the effects of the current
environment, the Syariah principles and values that underlies Islamic finance
provides an important underlying foundation," Zeti said.

"This has been further reinforced by the strengthening of the financial
infrastructure, the regulatory regime, the supervisory and legal framework, and
the crisis management capabilities," she said at the two-day Euromoney 8th
Annual Islamic Finance Summit on "Islamic Finance and Global Financial
Stability" which began Tuesday in London.

The text of her speech was released here Wednesday.

"As we weather the current environment and prepare for the next wave of the
growth cycle, it is also timely to explore the potential synergy that can be
optimised between London, an international financial centre, and Malaysia, an
international Islamic financial hub," Zeti said.

"And in so doing, capitalise on the respective comparative advantage,
thereby strengthening the linkages between Islamic financial markets, in
particular, between the East and West," she said.

Zeti said with total global Islamic financial assets now estimated at US$700
billion in 2007, the Islamic financial industry was offering a wide range of
complex and sophisticated Islamic financial products and services.

Of significance, she said, was its greater integration into the
international financial system.

As it becomes part of the financial globalisation process, Islamic finance
has however become increasingly exposed to the systemic implications of external
developments, Zeti said.

"Two issues are of interest. Firstly, as Islamic finance expands, its
potential for sustaining financial stability and secondly, how robust is the
industry to external shocks. In this regard, there are several areas of
potential collaboration," she said.

In the area of liquidity management, Malaysia has an established and vibrant
Islamic money market, the central bank governor said.

She said the range of Islamic money market instruments could be a viable
platform towards the development of a bilateral currency market.

With Malaysia's Islamic infrastructure and London's global reach, a
mutually enriching international currency Islamic money market could potentially
be developed in which other financial centres could participate and leverage on
the enhanced interconnectivity, Zeti said.

In the immediate term, it could accord advantages to Islamic financial
institutions in the United Kingdom and Malaysia to manage their liquidity
management requirements, she said.

In the area of sukuk (bond), Malaysia has the largest sukuk market while
London has one of the most established exchanges. Thus, an area for potential
cooperation could be in the area of the cross-listing of sukuk, according to
Zeti.

"Putting in place a mechanism for sukuk issued in one jurisdiction to be
recognised by the other would have a considerable impact on market
accessibility, thereby allowing for greater issuer and investor reach," she
said.

"In addition, mutual recognition can additionally be for all Islamic
financial products already approved in the respective jurisdictions so as to
facilitate greater cross-border transactions."

Zeti said in the area of talent development, Malaysia has a number of
learning establishments providing Islamic finance training and education.

"The UK in turn has long been associated with quality education.
Partnerships in this area have already been entered into," she said, citing the
example of a joint programme beteween the University of Reading and the
International Centre for Education in Islamic Finance (INCEIF) in Malaysia.

"The availability of a pool of skilled talent in Islamic finance is a core
element to support the continued innovation and maintain the vibrancy of the
Islamic financial system," she added.

-- BERNAMA