•  Greece is preparing for a historic election that may well decide its future in the Eurozone. •  Spain is experiencing severe strains in its banking system against a backdrop of a sharp reduction in GDP, high unemployment, and a deteriorating real estate sector. •  Italy and Spain are facing higher sovereign borrowing costs that threaten fiscal sustainability. To be fair, Eurozone governments have been taking extraordinary measures to help stabilise the situation, reduce fiscal deficits, and restore growth. But they have reached a turning point where bolder, decisive actions will be needed to reverse the tide. The next few weeks and months will be critical. Islamic finance: challenges to overcome Let me turn now to the subject of our conference. Islamic finance has shown remarkable resilience during the last five years – perhaps the most challenging economic environment in the post-war era. The industry has grown by an estimated 20% annually in the last five years to reach $ trillion in total assets in 2011. Islamic banks have grown both in number and in scope. BIS central bankers’ speeches  1  But the sustained growth of Islamic finance is in no way guaranteed. For Islamic finance to continue thriving, the industry has to overcome a few key challenges. But in every challenge, there is also opportunity. Let me highlight three of them this morning.
Singapore has grown over the past decade to become the largest REIT market in Asia outside of Japan. Building on this strength, players in Singapore have established the world’s largest Shariah-compliant REIT, which draws in conventional and Islamic investors around the world. Third, opportunities for interaction and collaboration. As Islamic finance gains prominence, conventional financial institutions increasingly want to be involved to tap these opportunities. Financial centres like Singapore serve as intersecting nodes where Islamic financial institutions collaborate with their conventional partners to jointly grow the industry. By applying the same regulatory framework to both conventional and Islamic financial institutions, Singapore aims to encourage financial institutions here to grow their suite of products and services for the Islamic finance industry. Conclusion Let me conclude. Islamic finance has come a long way. As it embarks on its next phase of growth, the industry must overcome the challenges posed by slower growth and global deleveraging, and build scale and reach critical mass. This requires financial institutions, regulators, and international standard setting agencies to work closely together. Forums like these are ideal platforms. I wish you fruitful discussions. Thank you. BIS central bankers’ speeches  3