adnan zaylani mohamad zahid : keynote address - islamic financial market forum keynote address by mr adnan zaylani mohamad zahid, assistant governor of the central bank of malaysia ( bank negara malaysia ), at the standard chartered's islamic financial market forum, kuala lumpur, 14 march 2023. * * * ceos, distinguished guests, ladies and gentlemen. assalamualaikum w. b. t and a very good morning. the financial sector blueprint 2022 – 2026 sets out what bnm's development priorities are for the financial sector over the next five years. in its third iteration, islamic finance remains a top priority. one of the thrusts, " advancing value - based finance through islamic finance leadership " is aimed at spurring growth that is progressive, sustainable and inclusive. this also intends to strengthen malaysia's value proposition as an international gateway for islamic finance which will be a reaffirmation of the " malaysia as an islamic financial centre ( mifc ) " agenda. since its inception in 2006, the mifc agenda of " internationalisation of islamic finance " has offered a platform for malaysia to position itself as a centre for the offering of islamic financial products and services in international currencies to the global and domestic financial community. many of our early initiatives and efforts were to build the foundations and to create the necessary critical mass for participating financial players, which would increase the scale of activity and financial services offered. malaysia aimed to attract global players as well as to enhance the capacity and capabilities of the domestic financial institutions. today, despite the effort to develop foreign currency ( fc ) issuances and other businesses out of malaysia, we have not yet reached a critical mass. to date, fc issuances constitute only 4 % of the total outstanding sukuk in malaysia ( march 2023 : rm1. 3 trillion ), with usd being the main currency1. in terms of international players, these past few years have seen more consolidation rather than expansion or growth. notwithstanding these, the fc or international business should represent a continuous opportunity for market players to develop further, in particular with the continued growth of our own international trade and investment and the foreign exchange liberalisations we have undertaken. moving forward, while the opportunities of fc business remain available, the mifc agenda will also give due consideration to strengthening the domestic ringgit market. inclusion of mgii into international indices such as markit iboxx albi,

s not so surprising given the nature of the downturn that preceded it. economic studies have found that the aftermath of a financial crisis is usually associated with substantial declines in output and employment and that it takes much longer to return to pre - crisis levels of economic activity. 1 recent research by staff at the federal reserve has shown that the current recovery from the financial crisis has been even slower than would have been expected. 2 this unusually weak recovery can be at least partly explained by the large drop in house prices and severe slump in housing activity that played such a major role in the recent recession. even though, technically speaking, the housing market contraction preceded the financial crisis, the financial crisis undoubtedly magnified the depth of the housing bust as the erosion in the net worth of households and the severely strained balance sheets of financial institutions led to a sharp tightening of mortgage credit. the drop in national house prices erased $ 7 trillion in household wealth. home equity was a large share of the total assets of low - and moderate - income families prior to the recession, so the drop in housing wealth has hit many families particularly hard. because wealth is one of the key factors that households consider when deciding how much to spend, the drop in housing wealth is expected to reduce household expenditures – the so - called wealth effect. this restraint on consumer spending is especially severe for households who owe more on their mortgage than their house is worth because such “ underwater ” households have been unable to take advantage of low mortgage rates by refinancing. with more than one out of every five mortgages nationwide estimated to be underwater in 2011, the resulting restraint on consumer spending and its effect on slower economic growth is appreciable. for examples, see valerie cerra and sweta chaman saxena ( 2008 ), “ global dynamics : the myth of economic recovery, ” american economic review, vol. 98 ( march ), pp. 439 – 57 ; carmen m. reinhart and kenneth s. rogoff ( 2009 ), this time is different : eight centuries of financial folly ( princeton : princeton university press ) ; and oscar jorda, moritz hp. schularick, and alan m. taylor ( 2011 ), “ when credit bites back : leverage, business cycles, and crises, ” nber working paper series 17621 ( cambridge, mass. : national bureau of economic research, november ). see greg howard, robert martin, and beth anne wilson ( 2011 ), “ are recoveries from banking and