This requires a strong mandate, sufficient policy instruments, and clear accountability structures. While macro-prudential policy has a clear and important role in contributing towards financial stability moving forward, it does not however diminish the important role of micro-prudential supervision. Indeed, the notion that more developed macro-prudential policy frameworks can, over time, provide a credible alternative to the close supervision of systemic financial institutions – for example, through the development of better predictive macro indicators, or through reliance on recovery and resolution plans alone – is misplaced. There can be no substitute for the effective ongoing supervision of financial institutions, which relies on supervisory assessments and judgments, and enhances the understanding of firm behaviours in a manner that models and plans, no matter how sophisticated, will never be able to fully achieve. Efforts should therefore also be accorded towards further strengthening  3  Based on the article entitled “The term ‘macro-prudential’: origins and evolution” published in the BIS Quarterly Review March 2010, which contains excerpt of the unpublished minutes of a meeting of the Cooke Committee (the precursor of the present Basel Committee on Banking Supervision)  BIS central bankers’ speeches  3  the conduct of micro-prudential supervision and promoting the complementarities between micro- and macro-prudential policies. Let me now turn my remarks to the growing role and relevance of Islamic finance in contributing to the global agenda of fostering sustainable growth that is firmly anchored to the real economy.

They continued to grow in the postcrisis period, driven mostly by the debt component of the government. As for the foreign direct investments, their growth in the last period stalled, mainly due to the decline observed in the CEE countries. In the other two sub-regions growth continued, but at a much slower pace especially during 2012-2015 period. Overall, the data indicate that the ECB policy measures positively affected financial conditions in the region. First, loosening of the monetary stance through conventional instruments (policy rate) created a room for loosening of the monetary stance in the Central and South Eastern  economies without negative implications for the balance of payments. Reduced policy rates led to reduced lending rates thus decreasing the costs of borrowing of the private sector. Second, the ECB asset purchase programs that resulted in unprecedented increase of liquidity most probably positively affected the liquidity conditions in the region, as well. Although at a significantly decelerated pace, capital inflows continued in most of the countries of the region. Exceptions are the outflows from the banks in the context of the process of deleveraging, although the outflows might have been bigger in absence of asset purchase policies. Portfolio investments have been relatively solid, explained to a great extent by governments’ borrowing on the international markets. Although the capital inflows were not sizable leading to creation of imbalances in the economies, vigilance is warranted. The pre-crisis process of rapid worsening of the net international position was stalled, but with differences across countries.