Muhammad bin Ibrahim: The “Islamic Finance Country Report for Malaysia 2015” Keynote address by Mr Muhammad bin Ibrahim, Deputy Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the launch of the “Islamic Finance Country Report for Malaysia 2015”, Kuala Lumpur, 30 June 2015. *  *  *  Thank you for the invitation today to officiate the launch of the “Islamic Finance Country Report for Malaysia 2015” published by IRTI, the research and training arm of the Islamic Development Bank. This country report is the fifth in its series and features Malaysia’s ongoing initiatives and prospects in transforming into a high income economy and the contribution of Islamic finance in this endeavour. Islamic finance in Malaysia has undergone three decades of progress and its current state of development is the reflection of the collaborative effort between the industry and the government. While Malaysia has achieved a number of successes, a lot needs to be done still. Islamic finance needs to advance from domestic-centric growth and expand beyond our borders. The next phase of achievement would very likely hinges on our ability to collaborate successfully with others and harness our capabilities to ensure that Islamic finance will progress and expand transactional activities across borders to remain competitive and dynamic.
But of course don’t expect a central banker to answer this question, one year in advance. I will just mention the Banque de France view on the rationale that should be behind the determination of the starting level of the euro area short-term rates. As you know, we currently observe interest rate differentials between the “core” and more “peripheral” currencies participating in the exchange rate mechanism. Although these spreads have been dramatically reduced in the past two years, due to the remarkable convergence of inflation rates throughout the European Union, some interest rate differentials still exist. They can be attributed partly to differing positions in the business cycle, and partly to differences in credibility. Cyclical differences within the potential euro area should not be overestimated. There is, all in all, a relatively high degree of synchronisation in the business cycle in continental Europe. The convergence criteria laid down in the Maastricht Treaty certainly played an important role in fostering this synchronisation. Moreover, in the future, differences in cyclical developments will gradually be reduced as policies, structures and behaviour will become more and more similar. Lastly, some persisting differences may well be tolerated as is currently the case between the various regions of the same country or, for instance, between the various member states of the USA. Credibility differences between “core” and “peripheral” currencies result from the different lengths of the track records in terms of stability-oriented policies.