The unequivocal and certain conclusion based on very detailed data, studies and stress tests is that the housing market and credit granting do not at present entail any problem for financial stability. If such problems were to arise at some point in the future, Finansinspektionen has suitable instruments, in the form of regulations regarding leverage, amortisation and housing cost calculations. However, the repo rate is a very blunt and thus less suitable instrument for affecting potential risks of this sort. Consequently, there does not seem to be any reason to allow house prices and credit granting to affect the repo rate decision now. At the monetary policy meeting, a number of members of the Executive Board stated that a possible future fall in house prices may have a negative impact on consumption in the future. This would lead to a fall in aggregate demand, with negative consequences for future resource utilisation and inflation. However, if one believes this, it should also be considered in the assessment of the influence of alternative repo rate paths on the forecasts for inflation and resource utilisation, and it should only be allowed to affect monetary policy in such a case. These forecasts are mean forecasts, and some probability of a negative outcome has a negative impact on the mean. In this sense, the forecasts are “risk-adjusted”. As usual, it is necessary to filter all information through the forecasts to determine whether or not it should affect monetary policy.

The task force will provide recommendations including on developing the framework for prevention and management of crisis taking into account the lessons for reform of the international financial system. Thirdly, and importantly is that international integration of Islamic finance would be facilitated by the mutual recognition of financial standards and products across jurisdictions. In the area of Shariah, there has already been the progressive convergence of Shariah views and rulings, and the mutual recognition of financial standards and products across jurisdictions. As this continues to occur, it would be a major driver towards greater international financial integration. This convergence and harmonisation is taking place with the greater engagement among the regulators, practitioners and scholars in Islamic finance across jurisdictions. To promote greater mutual recognition of products, Bank Negara Malaysia has embarked on the initiative to develop the Shariah Parameters to promote more consistent application of Islamic financial contracts. This initiative aims to determine the essential features of Islamic financial products derived from underlying key Shariah principles. This is also to provide greater clarity to the international community thereby facilitating greater cross border transactions. An International Shariah Research Academy for Islamic Finance (ISRA) has also been established in 2008 to promote greater engagement among Shariah scholars from around the world and to undertake research activities and contribute towards a greater understanding and international convergence. In this respect, we welcome relevant British institutions to collaborate with I SRA to advance this endeavour.