It is also a common pattern that a financial crisis is followed by several years of weak growth.2 I also noted at the July meeting that there was a tendency in the United States and Europe towards stagflation, with low growth and high inflation at the same time. Developments over the summer reinforce this image, but this does not mean that things will necessarily continue in the same way. …but developments in Sweden largely in line with the forecasts In Sweden we have received the first preliminary national accounts figures for the second quarter of this year, and new statistics for the labour market and inflation, for instance. GDP growth was slightly higher in the second quarter than we were counting on in July. Seasonally-adjusted quarterly growth came out at 1.0 per cent, against an expected 0.6 per cent. Although both domestic demand and exports were marginally weaker than the Riksbank had forecast, imports, which are a deduction item when calculating GDP, were even weaker. This means that GDP growth was slightly higher than expected. I expressed some concern at the monetary policy meeting in July that the second quarter would be weaker than our forecast in the Monetary Policy Report. This was not the case, which in itself is a good thing. But at the same time, more forward-looking indicators such as the purchasing managers’ index and the National Institute of Economic Research’s economic tendency surveys point to economic activity slowing down. This is something that we have already counted on.

The increasing interest in Islamic finance is a positive development as a larger number of institutions can contribute to more rapid growth of the industry. An increasing number of jurisdictions are now taking steps to modify their legislations to cater for Islamic finance. Ireland earlier this year published its Finance Bill 2010 which introduced significant amendments that are aimed at facilitating Islamic finance. France has also taken significant steps to push through changes to their tax and legal codes. Australia, Jordan and Lebanon are all reportedly working towards reviewing their legislations to be accommodative to Islamic finance. Given the importance of developing a supportive legal system, these global moves augur well for sustainable global growth of Islamic finance. In light of this development, I would like to make some remarks on the evolving legal framework for Islamic finance. In sharing my thoughts, I will draw heavily on some of the strategies and initiatives undertaken by Malaysia. BIS Review 161/2010  1  One of the key determinants for successful development of Islamic finance in any jurisdiction is the existence of a conducive legal framework that supports the operations and growth of the industry. Given that the legal infrastructure in any jurisdiction has evolved over the centuries to cater for conventional finance, understandably, governing legislations of a country have typically required modifications to accommodate Islamic financial transactions and structures. It is therefore of no surprise that jurisdictions that are able to quickly amend their legal framework have managed to achieve significant growth in Islamic finance.