- compliant high quality liquid instruments that could be used to meet a stock of liquid assets test. as you know, the cbb has undertaken a number of initiatives in recent years to assist the islamic financial sector to overcome this difficulty. nonetheless, although recognizing that the problem is a difficult one, the management of islamic financial institutions have a responsibility to ensure that they take appropriate steps to limit the risk of illiquidity to their institutions. prudent banking requires management to consider risk adjusted profitability. for example, putting a large proportion of the bank ’ s assets into potentially profitable, but also highly illiquid, real estate development projects may fail to achieve an appropriate risk reward tradeoff. if a bank has put all of its assets into long - term illiquid assets, it may show high levels of profitability for a few quarters, but it is unlikely to remain in business for very long. finally, let me turn to the role of the boards of directors and of senior management. the financial crisis involved failures of corporate governance at many different levels. there is a common pattern behind many of the failed financial institutions of the last 18 months. in many cases, the chief executive was a dominant figure who made sure that he alone took all important decisions. there was no culture of open debate and discussion within the institutions, with the result that members of the board of directors did not feel able to challenge the chief executive ’ s decisions. many bank boards lacked banking experts. individuals were recruited to the board of banks for their connections rather than for their knowledge of the banking industry and the ability to ask the right kind of questions. boards of directors also failed in their fiduciary duty to consider the interests not just of shareholders, but also of creditors and depositors. banks are not like other corporations where directors need to consider only the interests of shareholders. banks have a special position of trust in that they are charged with looking after other people ’ s money. this means the interests of creditors and depositors need to have equal weight with those of shareholders in the decisions taken by the board of directors. recognition of the directors ’ fiduciary responsibilities is, therefore, an essential element of corporate governance for banks. this observation applies with special force to the islamic financial industry. the fiduciary duty of the board of directors of an islamic financial institution does not only relate to the interests of shareholders, depositors, and other creditors, but also to investment account holders who bear many of

extraction. this, in turn, has prompted strong gains in both investment spending and employment in those sectors of the economy. most sectors with a low exposure to international trade ( such as personal services ) have also experienced relatively strong levels of profitability and solid gains in employment. on the other hand, with the substantial rise in the exchange rate and increased competition from many of the asian economies, many industries with a high exposure to international trade – typically manufacturers – have faced difficult adjustments since the end of 2002. this has been reflected in lower rates of profitability, modest gains in production, and declines in employment. but overall, canada has adjusted well to the challenges of the past five years. since 2002, our labour markets have performed well – the unemployment rate is now close to a 30 - year low. and our average annual economic growth rate has been greater than the average growth rate of the g - 7 countries as a whole. that's the national picture. in many respects, saskatchewan is a microcosm of these trends. real provincial gdp growth is solid and close to the national average. in the past five years, saskatchewan has seen its labour participation rate increase significantly – from 65. 7 to more than 70 per cent – and the unemployment rate has dropped from 5. 4 per cent in february of 2002 to 4. 1 per cent last month, indicating a robust labour market. of course, saskatchewan has been helped a good deal by the increase in world commodity prices that i mentioned earlier – especially for energy, potash, and uranium, while manufacturers here have faced challenges similar to those faced by manufacturers elsewhere in canada. to summarize, the past five years have been a time of large and significant economic adjustment. despite the stresses and strains that such a change can cause, canada has done very well, all things considered. the economy is strong, canadians are working, and they have seen increases in wealth and income. what are some of the factors that explain this successful adjustment? what explains the success of the adjustment process? in an open economy like canada's, the most important factor is flexibility. by flexibility, i mean the ability of the economy to adjust to changes in circumstance – that is, for resources to shift from areas of weakening demand to areas of strengthening demand – and for the economy to return to its production potential quickly, with as little cost as possible. but flexibility doesn't just happen – it's a function of structural policies, human capital, and our business