area. as a member of the eurosystem however, the banco de espana remains deeply involved in such discussions. in other realms, relations with the spanish authorities remain on a bilateral footing, as is notably the case with the close contact each year on the occasion of the analysis of the spanish economy via the article iv report. that said, the european dimension is becoming increasingly important. beyond the single monetary policy, there are various areas of european co - ordination in imf - related matters although, as is well known, the different european states are represented on an individual basis in the bretton woods institutions. spain, which adhered to the new arrangements to borrow ( nab ) as from their creation in 1998, is today an imf creditor country. and though we continue to benefit from the fund ’ s excellent technical advice, we also provide technical assistance, in some cases in collaboration with the fund, to other countries in the process of implementing systems or procedures in which we have a certain comparative advantage. moreover, the spanish authorities and, in particular, the banco de espana, co - operate increasingly closely with the fund on matters relating to national and international financial stability. as i indicated earlier, this issue is becoming more and more important, and the objectives and the interests of the fund tend to coincide in this connection with those of the competent national authorities. the reasons why national and international authorities pay greater attention to financial stability can be found in the crises a significant number of countries have undergone in recent years. these have highlighted the complex linkages between the real sector and the financial sector and the risk that the latter may not only be a source of instability, but also amplify the imbalances or shocks generated in other sectors of the economy. the links between exchange rate crises and banking crises - the so - called twin crises - and the feedback mechanisms between the two are, along with the propagation and contagion channels from one country to another, matters of particular importance here. national regulators and supervisors, in addition to their initial aim of safeguarding the solvency of individual institutions, have given increasing importance to combining the presence of flexible, efficient financial markets and intermediaries with the absence of excessive volatility on financial markets and to prevent the so - called systemic risks - which affect the whole of the financial system - from materialising. international financial institutions have also become increasingly oriented towards the need to ensure a proper functioning of international financial markets and to limit the transmission of shocks from one

yves mersch : islamic finance – partnerships opportunities between luxembourg and the arab countries speech by mr yves mersch, governor of the central bank of luxembourg, at the 5th economic forum belgium - luxembourg - arab countries, brussels, 17 november 2009. * * * excellencies, governor, ladies and gentlemen, good morning, i am very pleased to be here today, and i would like to thank the arab - belgium - luxembourg chamber of commerce for inviting me and especially its general secretary mr. hijazin. based on the agenda of this 5th economic forum, i am looking forward to hearing and learning and to explore potential partnerships opportunities between luxembourg and the arab countries in the field of islamic finance, which receives an increasing attention. in this perspective, i welcome and consider as essential such conferences that promote greater awareness of important developments within international banking. despite its traditional approach, islamic finance is a key “ innovation ” in the financial area since the seventies and i expect that today ’ s conference will provide an excellent opportunity to exchange information and ideas on current issues relating to this important sector. while efficient reactions to the global financial and economic crisis have been taken by government and central banks worldwide to stabilise the financial conditions of banks and reduce funding pressures, this unprecedented turmoil reinforces the need to revisit our economic and financial paradigm. the crisis suggests to some to deviate from markets driven economies and behaviours and to explore more ethical and humanistic values to drive sustainable value creation. one stream in this context is islamic finance promoting an alignment with the real economy. based on its prohibition of leverage activities, its principles of justice and participation, islamic finance is said to contribute to the reduction of the risk perception in the economy and hence its safe recovery. 1 specialists estimate the volume of islamic investments to exceed usd 750 billions and the pool of investible assets in the countries of the persian gulf and south east asia to reach usd 5, 000 billions. 2 in this part of the world, a non negligible part of the european population has ethical investment and placement needs based on the shari ’ ah that have, so far, not yet appropriately been addressed by the conventional banking offering. as of today, more than 38 millions muslims live in europe, representing more than 5 % of the population. 3 government and financial institutions alike try to cater for these needs. intrinsic difficulties for islamic financial institutions remain however related to the management of their liquidity and i will review how central banks, have engaged into different initiatives to