Erdem Başçi: Financial stability and
Turkey's achievements to date
Welcome speech by Mr Erdem Başçi, Governor of the Central Bank of the Republic of
Turkey, for the 17th International Conference of Banking Supervisors, Istanbul,
13 September 2012.
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Distinguished Deputy Prime Minister, Esteemed Guests and Distinguished Members of the
Media,
Welcome to Istanbul and to the 17th International Conference of Banking Supervisors jointly
hosted by the Central Bank of the Republic of Turkey and the Banking Regulation and
Supervision Agency of Turkey.
In my speech, I will try to summarize the importance we attach to financial stability and the
achievements we have made up to date.
Dear Guests,
There are three essential factors that determine the growth potential of a country; these are
price stability, financial stability and productivity. Any weakness in any of these three factors
may cause considerable damage to growth. The history of economics is teeming with
examples of this.
The social costs of loss of price stability are now very well known by economists. Academic
studies indicate that an inflation rate that is on average higher by 10 percentage points leads
to a reduction in the GDP growth rate an average of a quarter point.1
Meanwhile, the loss of financial stability has deep and long-term impacts on growth and
employment.2 The cost of preventing a financial crisis is much lower than the cost of the
crisis itself. Turkey's recent history is a very good example of this statement. The economic
crisis, which Turkey went through in 2001, increased the country's sovereign debt by
30 percentage points, and severely affected growth and employment prospects. As of 2002,
Turkey focused on establishing price stability, financial stability and introducing structural
reforms aimed at increasing productivity. As a result, while the country's economic prosperity
grew at a rapid pace, the financial sector gained a structure resilient to external shocks.
The steps taken towards fostering financial stability helped Turkey recover rapidly after the
2008-2009 global financial crisis and it weathered the European sovereign debt crisis of
2011-2012 with minimum damage.
Distinguished Guests,
The primary objective of the Central Bank of the Republic of Turkey is to achieve and
maintain price stability. Besides price stability, contributing to financial stability within the
limits of its purview has been also listed among the primary duties of the Bank.
Comprehending the importance of systemic risk along with macroprudential measures to
mitigate this risk to ensure financial stability has necessitated reconsideration of the
regulatory framework at global level. The enforcement of the Dodd-Frank Act in the US and
the European Systemic Risk Board (ESRB) in Europe as well as new regulations introduced
in other countries aim to mitigate systemic risk by means of macroprudential measures. In
this context, Turkey established the Financial Stability Committee in 2011. Along with the
Central Bank, the Committee is composed of the Banking Regulation and Supervision
Agency, the Capital Markets Board of Turkey, the Savings Deposit Insurance Fund and the
Undersecretariat of Treasury.
Distinguished Guests,
Now I would like to briefly mention Turkey's contributions to global financial stability. Turkey
became a member of the Financial Stability Board (FSB) in 2009. In 2014, Turkey will
participate in G20 Troika and assume Presidency of the G20 in 2015. During the period from
2014 to 2016, when Turkey will be taking part in G20 Troika, our representative from the
Undersecretariat of Treasury will be assigned to the FSB Steering Committee.
Turkey became a member of the Basel Committee on Banking Supervision (BCBS) and the
Group of Governors and Heads of Supervision (GHOS) in 2009. The Central Bank of the
Republic of Turkey will participate in the FSB Steering Committee during the period
2013-2015 when it will be chairing FSB Regional Consultative Group for the Middle East and
North Africa (MENA).
The New Constituency group, formed upon an agreement signed within the International
Monetary Fund (IMF) governance reform framework, includes Austria, Hungary, the Czech
Republic, Slovakia, Slovenia, Belarus and Kosovo along with Turkey. According to this
agreement, during the periods of 2014-2016 and 2018-2020, Turkey will assume the
Executive Director position on behalf of the group for two-year terms.
At the latest G-20 meeting held in Los Cabos, a number of emerging market countries
including Turkey declared their intention to contribute to global financial stability by
increasing the resources of the IMF. The Central Bank of the Republic of Turkey will
contribute to IMF resources up to USD 5 billion, to be counted as part of its international
reserves.
Distinguished Guests,
The Central Bank of the Republic of Turkey will continue to play its part in order to achieve
and maintain price stability and to contribute to financial stability in the upcoming period.
I believe that this two-day-meeting will be both fruitful and beneficial in terms of contributing
to global financial stability. I would like to take this opportunity to welcome once more all
distinguished participants to Istanbul. Thank you.