A series of factors – first and foremost, in the case of the euro area, the Russian invasion of Ukraine - are responsible for these adverse economic dynamics and for the surge in inflation to levels that we had not seen for decades. Accordingly, central banks, including the ECB, have responded swiftly to the inflationary pressures, tightening financing conditions for both private economic agents and the government. Moreover, these shocks have thrown into stark relief European vulnerabilities in key areas, such as the energy sector, as well as the considerable disparities among countries in their relative exposure to them. And this is happening against the background of an increase in euro area public debt by almost 10 percentage points (pp) of GDP since the pandemic, leading to high debt-to-GDP ratios and high structural deficits in some countries that have shrunk the available fiscal space and represent an important vulnerability. All these elements underline the importance of achieving the correct monetary and fiscal policy mix in order to face this complex context. The current circumstances differ substantially from those prevailing at the outbreak of the COVID-19 pandemic. The pandemic confronted us with a severe, albeit temporary, exogenous shock, which was probably the biggest supply and demand shock we had faced in decades. In that context, a coordinated fiscal and monetary policy response was absolutely necessary to support the incomes of both households and firms, and to minimise the potential structural damage to employment, productive capacity and economic growth caused by the crisis.

For Islamic banking, the sector has registered a strong growth of 19% per annum from 2000 to 2004. While the Islamic assets accounted for almost RM95 billion or 10.5% of total assets of the banking system as at end-2004, market shares of Islamic deposits and financing increased to 11.2% and 11.3% of the banking system respectively. The capital position of the Islamic banking sector remained strong during 2004, registering an increase of 14.7% to RM7.8 billion. The risk-weighted capital ratio and core capital ratio were sustained above 12% and 10% respectively. Ladies and Gentlemen, While our banking sector has made progress, as financial liberalisation and consolidation gather pace, greater competition in the banking sector is likely to ensue. As such, the need to enhance the competitiveness of the banking sector to withstand forces of change and compete in this more liberalised environment becomes even more pressing. Successful institutions will be the ones with the agility to adapt swiftly and respond to the changing market needs through - innovative and differentiated product offerings; excellent service quality; and superior level of efficiency. With growing competition in traditional banking products and services, banking institutions need to continually strive for excellence in product development capabilities with a greater focus on customised and higher value-added services. In this respect, banking institutions should capitalise on the opportunities presented by the emergence of new growth areas as well as rising households' wealth by strengthening their capabilities in the areas of wealth management, financial advisory services and consumer banking.