these rates are of prime importance not only for the refinancing costs of the banking sector, but for the pricing of loans to households and firms and, hence, crucially determine the wider financing conditions in the economy. this doesn ’ t mean that our standard toolkit played no role in our crisis response : confronted with downside risks to price stability after the lehman collapse, we swiftly cut our main policy rates to record lows. but further action was necessary to confront impairments to monetary policy transmission. here, three measures have taken a prominent role. bis central bankers ’ speeches first, we provided term - funding support to euro area banks through long - term refinancing operations. this measure avoided a major credit crunch when interbank lending dried up. second, we removed unwarranted and self - reinforcing fears of euro breakup by announcing outright monetary transactions. this measure mitigated major impairments in monetary policy transmission when sovereign bond spreads spiralled to fundamentally unjustified levels. third, we provided more explicit communication on the likely future orientation of our key monetary policy rates, including on the deposit facility, through forward guidance. this measure aligned market expectations more closely with our policy intentions when disturbances from within and outside the euro area interfered with our monetary policy stance. especially in extraordinary situations when, for example, policy rates are at, or close to, their effective lower bound, or when the normal channels of monetary policy transmission are impaired, or when there is exceptional uncertainty on the state of the economy, there is extra value in making central bank communication more explicit. so do these rather non - standard monetary policy measures mean the ecb has become more unorthodox during the crisis? again, the answer is : no. we have employed non - standard – not un - orthodox – monetary policy instruments precisely for the reason to achieve our orthodox monetary policy objective of price stability. in fact, the described challenges to the conduct of monetary policy during the crisis have required a more expanded set of tools to fulfil our price stability mandate. hence, they were an expression rather than a renunciation of our predictable monetary policy strategy with a medium - term orientation. vice versa, the anchor established through our price stability objective has allowed us to tailor our toolkit to the challenges at hand – without unanchoring inflation expectations. going forward, we must ensure that our policies continue to complement the adjustment in the euro area economy. at the same time, it must be clear that

rasheed mohammed al maraj : challenges facing islamic financial institutions speech by his excellency rasheed mohammed al maraj, governor of the central bank of bahrain, at the 14th annual world islamic banking conference 2007, manama, 9 december 2007. * * * fellow governors, excellencies, distinguished guests, ladies and gentlemen. on behalf of the central bank of bahrain, may i welcome you all to the inaugural plenary session of today ’ s conference. may i take this opportunity to thank the sponsors and organisers of this conference which this year concentrates on the mechanisms to encourage the growth of the islamic banking industry whilst containing its risks. over the last 20 years we have seen the establishment of several of islamic banks and financing companies as well as islamic banking windows as banks have rushed to satisfy the appetite of investors and consumers for sharia compliant products to finance assets from cars and houses to aircraft and project finance. however as banks have flourished in number, there is increasing evidence that banks will find it difficult to maintain the pace of innovation that marked the 1990s. islamic banks seem to be increasingly focused on real estate and asset finance but not moving into other financial or liquid instruments with active secondary markets. perhaps we can take this opportunity to look at the challenges facing islamic banking and see how the industry, its regulators and stakeholders may respond. the first challenge is the success of islamic banking. the sensational growth that has brought islamic banks such high profits over the past five years coupled with high levels of liquidity have meant that islamic banks have not had to fight for funding or ideas. the result is that we are seeing too many islamic banks with the same business models and structures. the availability of plentiful liquidity coupled with the explosion of real estate projects in the mena region have conspired to breed a level of, dare i say it, complacency in some islamic banks. many islamic investment banks are project - driven and do not have a steady source of " bread and butter " revenue to tide them over any slumps in economic activity. this is in contrast to many of the major conventional banks with loan books, overdraft and credit card facilities to provide steady revenue to cover overheads. another challenge facing islamic banks is the multiplicity of sharia boards and judgements. this leads to a lack of homogeneity for some products on the one hand, and a lack of uncertainty by clients as to whether a product developed in one jurisdiction is sharia compliant in