On the face of it, these add up to a substantial change to the Bank’s responsibilities; and to our operations and staffing needs. But in fact our underlying objectives as a central bank - what we term our three core purposes - have remained remarkably unchanged. These are, first, maintaining the integrity and value of the currency; secondly, maintaining the stability of the financial system; and, thirdly, seeking to ensure the effectiveness of the UK’s financial services. I would like to say something about each of the three core purposes in turn. Core purpose: monetary policy As regards monetary stability, as you all know, the Bank was given monetary independence in May 1997 when the Monetary Policy Committee was established to set interest rates. The structure of the Committee was later set out in the Bank of England Act 1998 and the Bank’s independence in pursuit of monetary policy is enshrined there. To quote directly, our objective is “to maintain price stability and, subject to that, to support the economic policy of HM Government including its objectives for growth and employment”. The balance implied in this objective is important. First,although the Bank has operational independence, the inflation target - RPIX (that is, retail prices excluding mortgage interest payments) of 2.5% - is set by the Government and confirmed in the Budget each year. And this target is symmetrical. We on the MPC are as concerned about inflation being below 2.5% as we are about it being above 2.5%.
Among the measures that have been introduced are: •  first, liberalising the Islamic banking, and takaful and retakaful markets with the issuance of new licences to allow for increased foreign participation;  •  second, allowing foreign equity of up to 49 percent in existing Islamic banks and takaful companies;  •  third, issuance of International Islamic Bank and International Takaful Operator licences under the Islamic Banking Act and the Takaful Act respectively to qualified foreign and Malaysian financial institutions to conduct the full range of Islamic banking business or takaful and retakaful business in international currencies and enjoy tax holiday for 10 years under the Income Tax Act starting from the year of assessment 2007;  •  fourth, granting approval to Malaysian Islamic banks and takaful operators to set up International Currency Business Unit (ICBU) to offer Islamic financial services in international currencies and enjoy similar tax holiday;  •  fifth, provide greater flexibility to the Labuan offshore entities offering Islamic financial services to open operation offices anywhere in Malaysia. The Labuan tax law will continue to be applied to these players. Players, therefore have the option in participating in the MIFC either by being licensed under Bank Negara Malaysia to benefit from the tax holiday for 10 years under the Income Tax Act and fully benefit from the Double Tax Agreement, or alternatively to be licensed under LOFSA and be taxed accordingly under the Labuan Offshore Business Activity Tax Act.