The funding cost relief is direct for those banks that switch from more expensive options to 9 / 19  BIS central bankers' speeches  TLTRO financing. However, there is also an indirect channel that benefits the entire banking system: while looking ahead banks will have to step up their issuance in order to satisfy regulatory requirements, the TLTRO programme will help avoid cliff effects by allowing banks drawing TLTRO funds to cancel or postpone plans to issue bonds in the market. This reduction in the supply of securities relative to what we would see in the absence of TLTRO III creates a scarcity channel that puts further downward pressure on bank bond yields, resulting in funding cost relief across the board. The upshot of cheaper bank funding is higher credit volumes and lower lending rates to the wider economy via the bank lending channel.9  10 / 19  BIS central bankers' speeches  In fact, our experience with previous TLTROs (TLTRO I and II) was that these operations had a significant effect on funding costs, particularly in more vulnerable euro area countries. Moreover, the lower funding costs were passed through to customers. Particularly in vulnerable countries, banks that participated in TLTROs cut their lending rates by more than their non-participating peers (see Chart 6). The policy package In assessing the impact of our policy package, we must also take into account that the instruments were designed to be complementary and mutually reinforcing.

Durmuş Yılmaz: Reform strategies and expectations in the new normal – a public perspective Speech by Mr Durmuş Yılmaz, Governor of the Central Bank of the Republic of Turkey, at the Active Academy 8th International Finance Summit, Istanbul, 8 December 2010. *  *  *  Distinguished participants and esteemed guests, Before starting my speech, I would like to thank the directors and staff of the Active Academy for their efforts in organizing the 8th International Finance Summit. The Turkish economy, which has achieved stronger macroeconomic fundamentals and a sound financial system thanks to steadfast implementation of structural reforms since 2001, has been one of the economies that exited the crisis very rapidly. In the upcoming period, the new economic conjuncture needs to be managed wisely in order to sustain macroeconomic stability. Therefore, today I would like to devote my speech entirely to macroeconomic stability. Distinguished participants, The recovery observed in the aftermath of the crisis continues albeit being slow and gradual. However, the downside risks pertaining to the future global growth outlook persist. Vulnerabilities continue especially in developed countries that experience serious deterioration in budget balances and an excessive rise in public debts. Perceptions are growing that the accommodative fiscal policies and expansionary monetary policies adopted by these countries fall short of achieving the desired results in unemployment and growth. Meanwhile, developing countries, which have stronger financial structures, are enjoying a faster recovery process. The decoupling observed between these two groups of countries is expected to continue in the upcoming period as well.