As you all know, unregistered employment is about 50% in our country. This rate is higher in agriculture, construction and the services sector, where inflation is relatively higher. Unregistered economic activities prevent firms from attaining the most efficient scale of production and producing at the lowest unit cost. Firms failing to attain the lowest cost scale price their products at a relatively higher level. One of the factors influential in this is the financial burden brought about by registration procedures. In order to remain unregistered, firms are not willing to grow in scale. They also abstain from applying for bank credits and delay technological renovations due to financial hardship. On the other hand, the competitive power of registered firms is eroded against their competitors, which take advantage of remaining unregistered. Besides, growing in scale becomes harder for these registered firms. Major reforms were made in Turkey in 2003 to improve the business environment. The most remarkable of these are the regulations to reduce the procedures in starting businesses and to ensure that all the required transactions are carried out under the body of a sole authority. As a matter of fact, the results of the “Doing Business” report by the World Bank reveals that our country ranks fairly high compared to other countries in terms of the duration for starting businesses, reservation of ownership, enforcing contracts and paying taxes. The concrete consequences of these reforms are apparent in the number of newly launched businesses in the period following the year 2003.

The 2012 MoU sets out a panoply of safeguards against the repetition of such an incident, including a requirement for timely notification from the Bank to HM Treasury of any risk to public funds, and analysis of the systemic impact of alternative policy options. The MoU makes it clear that the Chancellor has sole responsibility for the use of public funds, approves all ELA (including the terms on which it is provided), and may if necessary direct the Bank to extend ELA – though this is a backstop power, whose use is not expected to be considered in the majority of crisis situations. Where it is judged necessary to keep ELA covert for a period in order to minimise the risks to financial stability, key Parliamentary Chairs will be briefed orally by senior officials on any government indemnity attached to such lending – and full disclosure to Parliament would be made at the earliest subsequent opportunity once the risk of damage to the public interest had passed. 6 Covert operations, particularly those involving a fiscal component, are often cited as the most troubling forms of LOLR by those concerned that central banks have a bias to lend “too much”. In the United Kingdom, the disclosure of large covert loans to HBOS and RBS in late 2009 (more than a year after the loans were advanced) triggered a public debate about the  3  http://www.bankofengland.co.uk/markets/Documents/smf/annualreport15.pdf. 4  http://www.bankofengland.co.uk/about/Documents/mous/statutory/moufincrisis.pdf. 5  “The view from No.11” by Nigel Lawson, pages 402-6. 6  See page 22 of http://www.publications.parliament.uk/pa/cm200910/cmselect/cmtreasy/181/181.pdf.