(iii)  Thirdly, that the Shariah governance framework must be put in place as a additional dimension and a distinct feature in the governance structure of Islamic financial institutions. This is crucial in instilling public confidence on the purity of the operations of the Islamic financial institutions. The Shariah board or committee therefore represents another stratum in the governance structure. The Shariah Committee serves to ensure that the management of the Islamic banking institutions are in compliance with Islamic principles. (iv)  Fourthly, the framework should promote greater transparency and higher level of disclosure to address information asymmetry of the different stakeholders in the different structures of the transactions in Islamic finance thereby facilitating the effective functioning of market discipline. This is critical for the investment account holders who are in the position to influence the Islamic financial institutions if they were given adequate information on the investment strategy and results, as well as the applicable rate of return. The disclosure would also allow the market to assign appropriate risk premiums to respective companies and thereby enforce effective market discipline. The third key area is to strengthen existing mechanisms to translate Islamic values into business operations and governance. 2  BIS Review 39/2005  With the broad governance framework in place, the Islamic financial institution needs to have adequate mechanisms for effective implementation of the framework. This includes the systems of internal controls, internal and external audit, risk management, transparency and disclosure, and a strong compliance culture.

In other words, expanding fiscal and monetary policy will be no panacea to Europe’s growth challenge. Longer-term fiscal consolidation is imperative in light of a rapidly aging European population. On the monetary side, there is no indication that policy is too restrictive in light of real interest rates at or near zero for the Eurozone. Indeed, based on a standard Taylor rule framework, the ECB’s monetary policy stance is equally or in the recent past even more expansionary than that of the Federal Reserve. At any rate, neither fiscal nor monetary policy can ultimately address structural impediments to higher growth dynamics in the Euro area. In an effort to augment the EU’s growth potential, the focus must therefore be on breaking down labour market rigidities for additional labour input on the one hand and on accompanying policy measures to increase productivity on the other hand. Despite the subdued nature of the current growth outlook which is adversely affected by a strong Euro and rising oil prices, there are some promising signs that structural change is under way. Both the gradual dismantling of the 35 hour week in France and the shift to part-time and temporary employment in Germany are boosting labour input. In line with this positive albeit hesitant trend of bringing more workers back into the economy, productivity growth rates have begun to recede in Europe. The primary challenge for the European economy is to compensate this natural initial decline in productivity as a result of higher labour input.