a critical factor since the very open nature of the irish economy makes it particularly vulnerable to shocks emanating from abroad. since last year ’ s financial stability report, the world economy has continued to withstand shocks and maintain momentum. the pace of global economic growth strengthened further in the first half of 2006, and global growth has remained strong in the third quarter. in the euro area, following a spell of weakness in the latter part of 2005, activity has gathered strength in 2006. asia has experienced extremely strong growth, led by china and india, while in japan, the economic recovery continues to strengthen. the us economy expanded very strongly in the first quarter of 2006, but growth has slowed fairly significantly there since then. risks to the irish economy i would like to refer briefly to the risks which could pose problems for the financial system if they were to materialise. the main downside risks from the domestic environment continue to be, first, the disproportionately large dependence of the economy on the construction sector, which has not yet shown any signs of output returning to levels that would be sustainable in the medium - term, and secondly, the increased pressure on ireland ’ s competitiveness. the risks arising from the global economy are perceived to have increased since the 2005 financial stability report, notwithstanding the fact that global growth prospects are now somewhat more favourable. the relevant risks include volatile energy prices, global imbalances, potential adverse financial market and exchange - rate developments, the risk of inflationary pressures re - emerging and the possible fallout from the sharp weakening in the us housing market. vulnerabilties in the financial system the overall assessment of this report is that risks and vulnerabilities in the financial system may be seen to have increased since the financial stability report 2005 was published about a year ago. at that time, the major systemic vulnerabilities identified for financial stability were those arising from strong credit growth and rising indebtedness levels. this year these vulnerabilities remain, and are now combined with developments arising from higher repayment burdens and continuing uncertainty with respect to the outlook for house prices. however, the overall conclusion is that the irish financial system continues to be in a good state of health to cope with such emerging issues. the banking system overall health the stability and health of the irish banking system remain robust when assessed by the usual indicators of financial health such as asset quality, profitability, solvency, liquidity and credit ratings. the central expectation, based

luis m linde : islamic finance – growing importance and regulatory challenge welcoming remarks by mr luis m linde, governor of the bank of spain, at the european forum on islamic finance, organized by the islamic financial services board ( madrid ), madrid, 24 may 2016. * * * mr. jaseem ahmed, secretary - general of the islamic financial services board ( ifsb ) ; mr. guillermo de la dehesa, chairman of the international advisory board of ie business school ; colleagues, ladies and gentlemen : it is a pleasure for me to welcome you all to the european forum on islamic finance. this is the fifth european forum since 2005, after the previous fora in luxembourg, germany, france and italy. following the tradition established by other european central banks, we are glad to support this event, organised by the ifsb. i would also like to thank the ie business school for their hospitality in hosting the forum in madrid today. the purpose of this european forum is to gain a better grasp of the specifics of islamic finance and its development, which has been particularly noticeable in the last decade. in this respect, i would like to stress two relevant aspects of islamic finance in my opening remarks : first, its growing importance in international finance ; and second, the ongoing regulatory efforts to facilitate its insertion in international markets. the growing importance of islamic finance indeed, islamic finance has grown most significantly in the last decade, posting double - digit rates since 2007, at close to 20 %, compared with growth of 4 % in the “ conventional ” financial sector. it has now reached a volume of us $ 2 trillion, which is a very significant figure that represents around 1 % of total global bank assets. the surge of islamic finance is apparent both in islamic countries and also, in european markets, with the establishment of islamic banks and the development of the sukuk market for private and official issuers under some european jurisdictions. the prospects for islamic finance are also positive, given the extensive scope for the financial inclusion of a population in a number of countries, with very low rates of bank access and usage. the regulatory challenge of islamic finance the further development of islamic finance will nonetheless depend on implementing the necessary financial reforms to ensure its integration into the wider financial system. here, i think that the challenges are twofold : first, in islamic jurisdictions the challenge is to continue developing the architecture of islamic finance in areas such as payment systems and supervisory and resolution regimes. in particular, it would seem vital to