of liquidity, especially in us dollars. in the final quarter of 2008 we faced a situation in which our financial institutions were facing liquidity pressures, owing to the market reaction to the lehman brothers failure. to offset the liquidity outflow that had taken place after the bankruptcy of lehman brothers, the central bank instituted a new swap facility that permitted banks to exchange us dollars for bahrain dinar at no penalty. this helped greatly to ease liquidity conditions in bahrain ’ s money markets and allowed the 2008 year - end to pass without any significant market disruptions. as 2009 unfolded, liquidity pressures gave way to rising credit losses. within bahrain itself, losses reported by banks have been in line with those we would expect in a normal business cycle. the domestic impact of the crisis has been limited in large part due to the fact that our real estate market had not experienced high levels of speculative activity. however, since bahraini banks are major providers of credit throughout the mena region, they have been affected by credit defaults elsewhere, and by problems in the real estate sector elsewhere in the region. nonetheless, the high levels of capital adequacy of our banks has allowed them to absorb these losses and the banking system remains on a very solid footing. a further source of strength for bahrain ’ s financial sector has been our position as a hub for islamic finance. owing to the sharia prohibition on speculative activity and the requirement that financial transactions be backed by real assets, the islamic financial industry has been less affected by the global financial crisis than the conventional sector. while this sector has no room for complacency, as its customers are just as likely to suffer from the economic downturn as those of conventional banks, we nonetheless believe that there are enormous opportunities for sharia - compliant finance to take up some of the slack created by problems in the conventional financial industry. the sukuk market, in particular, is one that we believe provides a flexible financing mechanism which contains enormous potential. with bahrain ’ s long track - record and supportive regulatory regime for islamic finance, we believe that this is an aspect of the financial sector that is ripe for further development. let me again welcome you to bahrain and thank you for your participation in this important event.

rasheed mohammed al maraj : ensuring stability – international perspectives on creating an effective regulatory framework inaugural plenary address by his excellency rasheed mohammed al maraj, governor of the central bank of bahrain, at the 15th world islamic banking conference 2008, manama, 24 november 2008. * * * your excellencies, ladies and gentlemen : “ salaam alaikum ” it is a pleasure to participate in this opening session, and to have this opportunity to welcome you all to the 2008 world islamic banking conference. this is the 15th conference of its kind to have been held here in bahrain, and in july of this year, the first wibc european summit was held in london. the inaugural european summit was yet a further indication that islamic finance is rapidly moving into the financial mainstream. i should like to begin by thanking the many distinguished speakers who will be appearing during the conference, as well as the event organisers and sponsors. collectively, your contributions are the reasons for the success of this event. i should also particularly like to extend a warm welcome to his excellency heng swee keat, managing director of the monetary authority of singapore. thank you for being with us today. the theme of this session – “ ensuring stability : international perspectives on creating an effective regulatory framework ” – is timely in my view. until very recently, many commentators and analysts believed that the economies of the gcc were an oasis of calm in the ongoing global financial turmoil. however, since the collapse of lehman brothers in mid - september, it has become clear that no part of the world can be immune to the present crisis. we have seen a vastly changed financial landscape, and there is little doubt that the availability of funds and the costs of borrowing are being affected in all parts of the world. against the background of this global financial turmoil, it seems a good time to take stock of the prospects for the islamic financial industry, and to consider in particular how best to ensure the stability of the industry in future. in recent months as the global financial crisis has deepened, many commentators have pointed out that islamic financial institutions have escaped relatively unscathed from the severe downturn which is affecting most conventional financial institutions. this certainly presents the industry with an opportunity to continue its rapid and successful growth of recent decades. however, the fact that shari ’ a compliant institutions have avoided significant losses resulting from the global financial crisis does not mean that there are no lessons that they can learn from the fallout. let