and well capitalised and our economy is not over leveraged and our external position remains strong, malaysia as an open economy is already adversely affected by these global developments. the domestic conditions are expected to remain challenging in the coming quarters and a range of policy responses are being implemented. two elements are vital in this process. the first is to ensure that the domestic intermediation process remains strong so as to support domestic demand. and secondly, the fiscal stimulus is key to containing the effects of the external developments and to placing malaysia in a position to resume growth once conditions in the global economy stabilises. during this challenging period, financial institutions including islamic financial institutions have an important role to ensure the continuous access to financing by the private sector. key to this, is the forward looking business strategies being adopted by banking institutions, the organisational structure and the operational capability that is put in place. i would like to take this opportunity to highlight two other important dimensions in the development of islamic finance, going forward. for more than two decades, the islamic financial system in malaysia has gradually transformed into a comprehensive islamic financial landscape. this has been reinforced by a legal and regulatory framework, the essential financial infrastructure, and an environment conducive for product innovation. notwithstanding the success of islamic finance, the global ramifications of the crisis also calls for more concerted efforts to bring the industry to a higher level of resilience. of importance, in this process, is to embrace the values of islamic finance of justice and fairness that benefits the society and the system. it is thus important for islamic finance to transcend beyond just the pursuit of growth and monetary performance but also to emphasise ethical market conduct practices. indeed, this is in line with the principles of maqasid al - shariah ( objectives of shariah ). financial innovation, as has been shown in the recent crisis has led to adverse consequences for the economy. by learning from the lessons of the recent crisis, the process of innovation in the formulation of islamic financial products and services must be done carefully and in accordance with shariah in its entirety and to take into account the distinct risk characteristics of islamic banking. the second dimension is on the need for continuous investment in human capital development. it is important for the islamic financial services industry to continually promote human capital development and expertise to create a larger pool of experts and high calibre professionals. this involves enlarging not only the existing talent pool, but also building a

carolyn wilkins : liquid markets for a solid economy remarks by ms carolyn wilkins, senior deputy governor of the bank of canada, to the chambre de commerce du montreal metropolitain, montreal, quebec, 5 may 2015. * * * i ’ d like to thank alexandra lai, cesaire meh, chris graham and jing yang for their help in preparing this speech. introduction good afternoon. it ’ s a real pleasure to be here in montreal, where i have family roots. i want to talk today about an important financial force that affects all of us who invest and borrow. i ’ m talking about financial liquidity, in all of its forms. right now, liquidity is going through some important changes. we are all affected by liquidity, whether we realize it or not. if you are a business person, you need funding liquidity, which means that you have reliable access to financing on reasonable terms. if you invest in the stock market or in corporate bonds, you need market liquidity so you can buy or sell assets quickly, at predictable prices. the same is true if you are a saver through certain kinds of mutual funds that promise you access to your savings when you want them. as a central banker, i want the economy to have the right level of liquidity available at the right price so the financial system can keep working smoothly for businesses and households and the bank ’ s monetary policy actions work the way they are supposed to, in order to meet our inflation target. 1 today i ’ ll talk about what has been happening to liquidity in the financial system. i ’ ll start by looking back at the recent financial crisis and the lessons we learned. then i ’ ll review the reforms that are being implemented in canada and elsewhere and talk about how the financial system is evolving and what all this may mean for you. finally, i ’ ll discuss the next steps we ’ re planning at the bank of canada to promote a smoothly functioning and safe financial system. the crisis and its lessons the seeds of the crisis were sown in a time when liquidity seemed to be everywhere. think back to 2006, when it was relatively easy for businesses to get loans and households to take out mortgages. financial institutions, particularly in the united states, were so eager to boost profits by extending credit that they started bundling mortgages and securitizing them. these securities satisfied the demand for so - called safe assets that gave a higher return. memories become more painful