15 If they resisted currency appreciation pressures by lowering their policy rates, they risked overstimulating domestic demand, exacerbating financial excesses, and overheating their economies. If, instead, they reduced their policy rates less than the United States had done while intervening to resist currency appreciation, capital inflows could have increased further, thus partially offsetting their attempts to stabilize their economies.
Effective prudential supervision for Islamic banks the world over is still in its infancy. The very fact that Islamic banking differs from conventional banking in important ways poses regulatory and supervisory problems. The risks taken by Islamic financial institutions are not directly comparable to those of conventional financial institutions.