Required yields have now fallen again in the secondary market and so has pricing of Icelandic banks’ CDSs. The banks have also tapped international credit markets on favourable terms recently and have more than met their capital requirement so far this year. Their market position has therefore definitely improved again, which must be welcomed. The banks have vigorously expanded in other countries in recent years. Most indications are that their foreign investments have been successful, in the Central Bank of Iceland’s view. Their subsidiaries are sound financial companies subject to stringent supervision in their home countries, just like the parent companies in Iceland. Likewise, these companies operate in stable economies where the outlook is bright. At the end of 2005, two-thirds of the banks’ consolidated lending was to foreign borrowers. In effect, therefore, overseas expansion has strengthened the banks’ foundations. They are no longer so much at the mercy of economic fluctuations in Iceland or any other country. On the contrary, their risks are dispersed. Pension funds I shall now turn to the matters in which you are most directly involved, the position of pension funds in Iceland. Their position is remarkable in all respects, especially by international comparison. Most or all other industrial countries have rapidly ageing populations and face growing and serious fiscal concerns about future pension fund arrangements. Since their pension schemes are largely funded by taxation, a sharp rise in contributions is foreseeable over the next few decades.

In 2004, we issued three new licences to foreign Islamic financial institutions. In 2005, Islamic windows of the conventional banks were encouraged to be transformed into Islamic subsidiaries that allowed foreign equity participation of up to 49%. The foreign exchange administration rules were also liberalised to allow foreign corporations and agencies to issue ringgit sukuk in Malaysia. In 2006, foreign tie-ups were encouraged – in the four new licences for takaful business that were issued. Following these developments, the MIFC was launched in 2006 to develop Malaysia as an international hub for Islamic finance. Under this initiative, new international Islamic banking and takaful players could be established in Malaysia to conduct business in foreign currency. In 2007, foreign entities were permitted to issue non-ringgit sukuk from the Malaysian market. Foreign entities could also operate Islamic fund management activities here. Early this year, the announcement was made that up to two mega Islamic banking licences with up to 100% foreign ownership would be issued to conduct international business. These initiatives cumulatively have internationalised our Islamic financial system in terms of the presence of foreign players and in terms of participation in our financial system. The Commodity Murabahah House, or the CMH, that is being established today will be an important platform that will further enhance global interlinkages in the international Islamic financial system. The CMH is designed to be a multi-currency and multi-commodity exchange-traded platform to facilitate the trading and settlement of commodity which acts as the underlying transaction for liquidity management between Islamic financial centres.