Simon M Potter: Money markets and monetary policy normalization Remarks by Mr Simon M Potter, Executive Vice President of the Markets Group of the Federal Reserve Bank of New York, at the Money Marketeers of New York University, New York City, 15 April 2015. *  *  *  I would like to thank Julia Gouny, Deborah Leonard, and Eric LeSueur for their excellent assistance in the preparation of these remarks and colleagues in the Federal Reserve System for numerous insightful comments and suggestions. Accompanying charts can be found at the end of the speech. It is a pleasure to speak again at the Money Marketeers. Much has happened with the implementation of monetary policy in the sixteen months since I last addressed this audience: •  Recognizing a substantial improvement in the outlook for the labor market, the Federal Open Market Committee (FOMC) concluded its outcome-based asset purchase program in October 2014, having completed a total of $ trillion in Treasury and agency MBS purchases over nearly two years. •  The Federal Reserve has continued to test operational tools that it can use to control interest rates with a large balance sheet, through a continuation of the overnight reverse repurchase agreement (ON RRP) exercise that began in September 2013, as well as through term RRPs and the Term Deposit Facility. •  The FOMC revised and augmented its communications around the approach it intends to implement when it becomes appropriate to begin normalizing the stance of monetary policy.

Therefore, while ensuring that Islamic financial regulatory standards remain adaptive and effective in riding the evolutionary waves of financial innovation, it will be equally important to ascertain that regulatory requirements do not inhibit conducive market practices that promote the growth and development of the Islamic financial services industry. Ladies and Gentlemen: The Islamic financial system has an in-built dimension that promotes financial soundness and stability, as it resides within a financial trajectory underpinned by the forces of Shari'ah injunctions. These Shari'ah injunctions interweave Islamic financial transactions with genuine productive activities and prohibit involvement in illegal and unethical activities. This intrinsic principle of governance contributes  2  BIS Review 64/2002  towards insulating the Islamic financial system from the potential risks of financial stress triggered by excessive leverage and speculative financial activities. Indeed, the Islamic financial system derives its strength and stability from its faculty to uphold Shari'ah principles. This demands the internalization of Shari'ah principles in Islamic financial transactions, in its form, spirit and substance. This epitomizes the objectives of the Shari'ah in promoting economic and social justice. To achieve this objective, the Islamic financial regulatory and supervisory regime must always ensure Shari'ah compliance. Integral to this process is the success in achieving "unity in diversity" of the interpretations of Shari'ah injunctions in the realm of finance. In this regard, the Islamic Financial Services Board aims to strengthen the current initiatives to achieve a greater degree of convergence and harmonization.