Conference of the Chair BdF/PSE, Paris School of Economics Current Challenges of Monetary Policy September 24, 2019  Speech i by François Villeroy de Galhau, Governor of the Banque de France  Press contact: Mark Deen (mark.deen@banque-france.fr). Page 1 sur 11 Ladies and Gentlemen, It is a particular pleasure to welcome you on the occasion of the 10th anniversary of the Chair Banque de France/PSE. All anniversaries are worthy of celebration, but the continued partnership of Banque de France with the Paris School of Economics is a particular reason for cheer. Over the past ten years, it has been a testimony of how academic research and economic policy making can reinforce each other. In the past ten years, thanks to their interaction, much has been done to make our financial environment more capable of reining in financial excesses. Thanks to both, we have introduced many new unconventional tools to implement monetary policy. But these changes have also brought new questions and new uncertainties, on which more academic research is needed. Hence, I would like to elaborate on two present challenges: the conduct of monetary policy in our current economic environment, and the interaction between monetary policy and financial stability. ** 1. Monetary Policy in the Face of New Challenges 1.1. A New Environment Calling for New Responses  These new uncertainties arise at a time when the global economic environment has itself become increasingly uncertain.

The players in the Islamic financial industry must therefore, have in place robust risk management practices and system. In this regard, the establishment of the Islamic Financial Services Board has been timely. The IFSB has the important mandate of developing the prudential standards in accordance with the unique features of the Islamic financial institutions. Given that the IFSB and the existing standard setting body embraced common objectives, l do not see any difficulty in integrating the international standards with the Islamic prudential standards. This will contribute towards the development of a robust and resilient Islamic financial system that can effectively preserve financial stability and contribute to balanced growth and development. This will also facilitate the integration of the Islamic financial system as a viable component of the global financial system. Over the years, the Islamic financial industry has adopted the adaptation approach in the formulation of Islamic financial products and services. Although there are Islamic financial instruments that are distinct from the conventional financial instruments, the numbers are still few. In most instances, the Islamic financial products are repackaged along the features of the conventional financial products, while eliminating the elements that are not in-compliance with the Shariah. While this adaptation can continue, the downside risk is that Islamic financial instruments will always have to “catch-up” with the pace of product development in the conventional system. Efforts should therefore be intensified to develop new financial products that embodied the virtues of Islamic banking. This would evolve Islamic financial instruments into distinct, innovative and cutting-edge products.