The immediate impact of the war in Ukraine on financial stability has so far been adequately absorbed as the direct exposures of the financial sector to Russia were low. However, risks to banks and financial stability may materialise through second-round effects and indirect channels from pre-existing vulnerabilities, notably those associated with (i) sectors most dependent on energy commodities, (ii) the development of leveraged finance and (iii) exposure to cyber-attacks. In this respect, particular attention should be paid to potentially sharp revaluations of high risk asset prices. The same holds true for rising prices and volatility in commodity markets and the considerable increase in margin calls on derivatives, in particular for energy and agricultural products. These have already put pressure on the liquidity of commodity market participants. Very careful monitoring of credit and liquidity risks in the energy commodities sector is therefore required, in particular to ensure that any potential default (e.g. by a trader) remains contained and does not lead to systemic contagion. Our second instrument for maintaining and strengthening banks' shock absorption capacity, after supervision, is regulation. I would like once again to stress the importance of an effective, fair and final implementation of the Basel III Accord, in its final 2017 version. As I said it last year, quoting the Governor, and it is even more the case today in the light of the crises we are facing: the Basel III rules represent the best possible agreement to promote financial stability at the international level.

Durmuş Yilmaz: Press conference for the presentation of the Inflation Report Press conference by Mr Durmuş Yilmaz, Governor of the Central Bank of the Republic of Turkey, for the presentation of the Inflation Report, Ankara, 27 July 2010. *  *  *  Distinguished Guests and Members of the Press, Welcome to the press conference held to convey the main messages of the July 2010 Inflation Report. The report typically summarizes the economic framework addressed in monetary policy decisions, elaborates global and domestic macroeconomic developments and presents the medium-term inflation forecasts, which have been revised in view of previous quarter developments, along with the monetary policy stance. Before moving on to the Central Bank’s assessments on the inflation outlook and economic activity, which I will share with you in detail shortly, I would like to summarize the current global conditions. The recovery in global economic activity continued during the second quarter of 2010. However, with the deepening financial distress, the euro area experienced weaker growth than other advanced economies, pushing down the growth rate for advanced economies, whereas, emerging economies continued to grow faster than advanced ones (Figure 1). Furthermore, it is noteworthy that that the modest recovery in growth in advanced economies has not yet been reflected on labor markets (Figure 2). This situation continues to have a detrimental effect on sustainable recovery in these countries. Despite the recovery in global economic activity, recent developments have confirmed that the global economy remains fragile.