abdul rasheed ghaffour : keynote address - third fitch ratings islamic finance symposium 2024 keynote address by mr abdul rasheed ghaffour, governor of the central bank of malaysia ( bank negara malaysia ), at the third fitch ratings islamic finance symposium 2024, organised by fitch ratings, kuala lumpur, 6 march 2024. * * * it is my great pleasure to be part of this symposium, and my thanks to fitch ratings for the invitation. this gathering offers an excellent platform for us to continue important conversations about the growth prospects for islamic finance against the current environment of tight global financial conditions. growth prospects for the global islamic financial system global islamic finance assets are estimated to have reached usd4. 5 trillion in 2022 and are projected to reach usd6. 7 trillion in 2027. 1 the industry has grown more than twofold compared to a decade ago. almost 60 countries now have islamic finance regulations, 2 with several new markets in asia and africa exploring to introduce islamic financial services. the prospect for expansion of the global islamic economy remains promising. furthermore, the intrinsic values of shariah that promote a balanced distribution of wealth and value of ihsan ( the act of doing good and performing one's duty in the best possible way ) are imperatives to achieve inclusive growth. strong demand for halal industry and impact - driven finance, offer significant opportunities for the industry to play a bigger role in intermediating investments across markets. deepening the development of islamic financial markets will be an integral component to this aspiration. there are three important priorities that will unlock a stronger role of islamic finance in supporting global financial intermediation : a. first, to strengthen the vibrancy and depth of islamic financial markets. this includes ensuring regulatory clarity and industry coherence, as well as instrument diversification are in place ; b. second, to advocate for system - wide alignment to value - based finance and universal principles of shariah for sustainability across all sectors. and this needs to be supported by clear demonstration of measurable impact ; and c. third, is to unlock impactful innovation via diverse shariah contract structures including deployment of blended finance, supported by an enabling ecosystem and circle of expertise. islamic finance a driving force in shaping malaysia's sustainable economic growth these priorities are also very much aligned with malaysia's financial sector blueprint. 1 / 4 bis - central bankers'speeches in strengthening malaysia's global position as an islamic finance gateway, efforts

react and when. a number of arguments may be quoted for and against undertaking action by central banks during a boom phase of a bubble 2. i enumerated them in my book on globalization 3. on this opportunity, i wish to quote the three premises which, according to donald kohn 4, the federal reserve vice chairman, are necessary to justify the activities undertaken by central banks to pursue this aim : borio c., lowe p. asset prices, financial and monetary stability : exploring the nexus, bis working paper, no. 114, july 2002. see references at the end of the speech. rybinski k., globalizacja w trzech odsłonach, difin, warszawa 2007. kohn d., remarks by donald kohn at monetary policy : a journey from theory to practice, an ecb colloquium held in honor of ottmar issing, 16 march 2005. • a central bank must be able to identify bubbles on an asset market in a timely fashion with reasonable confidence as to the adequacy of the findings of its analysis, • there must be a fairly high probability that a modestly tighter policy will help to check a further expansion of speculative activity on a given asset market, • the expected improvement in future economic performance must be sizeable and bigger than expenses disbursed by the economy as a result of conducting those activities. the last condition points to the restricted use of interest rates for the purpose of bursting a bubble, since the level of interest rates has a bearing not only on decisions taken by entities directly engaged in the process of forming a bubble but in fact on all the entities operating in the economy. to evoke a vivid picture, the use of interest rates to this end may be compared to the use of an atomic weapon in the battlefield – for an atomic bomb makes no distinction between friend and foe. donald kohn ’ s conditions are not easy to meet. therefore, the opinion now prevails that supervisory authorities must enhance their macroprudentail activities 5. consequently, one of the conclusions is to take recourse to supervisory instruments with a view to bearing on decisions of those market participants which are primarily responsible for bubble formation and report to supervisory authorities. by way of illustration, although the supervisory authorities do not interact with financial institutions which extended a large part of subprime loans or with arbitrage funds which purchased instruments backed on those loans, they continue to oversee the