mercedes marco del pont : the certainties and uncertainties in the world economy speech by ms mercedes marco del pont, governor of the central bank of argentina, at the money and banking conference 2010, central bank of argentina, buenos aires, 2 september 2010. * * * this 2010 conference is very special to all argentineans because this year is our country ’ s bicentennial and the 75th anniversary of the central bank. we are celebrating this money conference in the framework of a world economy with abundant uncertainties. during the early morning session, the possibility of developed countries entering a final, sustainable and balanced growth phase was discussed. there is also uncertainty as to what is going to happen to the weakest european economies that are implementing the fiscal consolidation and adjustment programs imposed on them to settle their debt issues, which most of us think will probably stress europe ’ s current structural issues. there is also uncertainty in the international financial regulation arena and its new engineering. after the onset of the crisis when rock bottom was hit, there were some signs of a possible exit to the crisis with the emergence of positive indicators in a number of developed economies ; now the most critical positions concerning a substantial reform of the international financial architecture are starting to fade away. the idea of making changes so that everything at the structural level remains the same seems to be consolidating. there are many more uncertainties that could be discussed, but i would rather speak to you today about some certainties we have in developing countries, especially in argentina. we have one clear certainty : for the first time in our short - and long - term history, countries in the region, in general, and argentina, in particular, are going through this global crisis – one of most severe since the great depression – with very low economic and social costs, without having faced a cyclical and structural external sector crisis or been immersed in recession crises leading to job and wealth destruction. in fact, it was quite the opposite : as we faced this crisis, activity levels were preserved, macroeconomic imbalances, avoided and, at the same time, income levels were intended to be distributed, both in argentina and in many countries in the region. this is not by chance. it is the result of our countries ’ consistent economic models, which gave up old conventional theories that furthered our nations ’ underdevelopment, and drove attention back to domestic market growth supported by wage corrections and redistribution policies, where public investment acts as a source of wealth and social inclusion

arise from looking to introduce islamic financial principles into a regulatory framework that was structured without these principles in mind. however, these issues are not specific to luxembourg only and exist in the whole western countries. 10 one example of issues that precisely fits into the role of a central bank is the absence of an appropriate market of shari ’ ah instruments to facilitate the management of the liquidity needs of islamic banks or islamic financial institutions and funds. the prohibitions of interest rate as well as the lack of a dedicated infrastructure and adequate instruments prevent the islamic banks from developing a viable value proposition : rejecting leverage and speculative transactions, islamic banks need to have greater amount of capital and to sustain a higher liquidity ratio than their conventional counterparts. as a result, their activities turn to be less profitable and less competitive compared to those of their conventional counterpart when addressing the same customer segment. the structural obstacles together with the lack of technical and contract standardization ultimately prohibit islamic financial institutions from succeeding in the competitive financial landscape where consumers make rational choice not only driven by religious principles. in order to facilitate the emergence of a resilient islamic financial market in europe, we have to adapt and shape the infrastructure and supervisory environment to allow efficient and cost effective trading and clearing for a significant number of investment - grade islamic financial papers across the whole maturity spectrum. in this perspective, it is worth noting that in the current turbulent period, raising finance through sukuk issuance appears to be cheaper than recurring to conventional bonds due to the burgeoning demand for islamic instruments. 11 to reflect the specific needs of shari ’ ah - compliant finance, the aaoifi ( accounting and auditing organization for islamic financial institutions ) and the ifsb ( islamic financial services board ) are working on developing international supervisory standards for instance to improve the corporate governance frameworks or implement capital adequacy and risk management standards for islamic financial institutions. 12 in closing, let me emphasize that, the banque centrale du luxembourg has applied for membership to the islamic financial service board and would be the first central bank in europe to participate to this international standard setting organisation. we also second staff to become familiar with islamic finance and study the before mentioned issues, notably liquidity management. despite the lack of detailed and scientific studies about the potential effect of islamic finance on the price and financial stability, the resilience of islamic banks to the recent crisis 13 cf. gilles saint marc ( 2008 ), “ finance islamique et droit francais “, presentation to the finance commission