Since the holding of reserves, which by definition is denominated in other countries’ currencies, generally means that the home country is financing investment and development of other people’s countries, then on the basis of pure arithmetic, countries should hold no more foreign exchange reserves than they think is necessary.
Increasing demand for Shariah-compliance augurs even better days ahead for the Islamic finance industry as we prepare to enter the field. In these circumstances, how could we resist stealing a page from Eddie George’s book? Just like the British FSA did over 10 years back, we steered our thinking towards having a regulatory framework that accommodates both conventional and Islamic financial institutions.