, despite an adverse global financial landscape and macroeconomic environment, their tier 1 car would be maintained at 8 - 10 % in 2009 and 2010, as already stated. within the euro area co - ordinated framework, the €28 billion banking support package arranged by the ministry of economy and finance in close co - operation with the bank of greece addresses both the issues of the capital base and liquidity of the banks, so as to minimize the risks from the global crisis on the real economy. the banks, in turn, will channel the available liquidity to the real economy, because this is also in their own interest, since their own profitability depends on giving loans. to restore medium - term liquidity, the guarantee of the greek state, will be provided to credit institutions for the issuance of new medium - term loans, as well as for notes that will be issued or refinanced up to the end of 2009 and for a maturity of up to 3 years. the total amount of this guarantee will not exceed €15 billion and it will be provided either against a commission and the provision of adequate collateral or without collateral, but against a higher commission. measures for strengthening the capital base : credit institutions may benefit, on a voluntary basis, from the purchase by the greek state of preference redeemable shares, up to an aggregate amount of €5 billion. these shares will pay a fixed annual return of 10 % and they will be eligible as tier i capital, allowing credit institutions to enhance their capital base. the state plan has now entered its implementation phase and most of the banks are preparing their participation, but the impact of the measures will be felt more in the 2nd quarter of 2009. despite popular belief, greek credit institutions are ready to make use of the measures. although specific criteria have been already set, a fair distribution of the total available amount of €28 billion remains an extremely delicate task. it is also difficult to estimate how much each bank will ultimately draw and which part of the whole amount must be retained to be used in a later stage. it should be noted that, in exchange of the government bonds and guarantees, the bank of greece will have to assess, process and monitor on a continuous base the volume and the variety of the collaterals given by the banks. this means that we will have to be constantly alert and the relevant mechanisms at the bank of greece must operate efficiently at full capacity for as long as it will be deemed necessary. basically, the aim of the

erdem basci : commodity price volatility speech by mr erdem basci, governor of the central bank of the republic of turkey, at the “ g - 20 commodity price volatility conference ”, istanbul, 13 september 2011. * * * dear colleagues and distinguished guests, today i will discuss commodity price volatility, a topic which has vital importance for the global economy and thus for policy makers. in my speech, i would first like to discuss the possible sources of commodity price movements and then elaborate on the approach of the central bank of turkey in dealing with commodity price changes in the past few years. commodity markets cover a wide range of raw materials such as oil, metal and agricultural products. these commodities have different characteristics not only in terms of trade volume, supply and demand structure but also in terms of their exposure to financial market transactions. understanding the sources of the volatility in prices is essential in order to give appropriate policy response. the challenges posed by high and volatile commodity prices are important worldwide, yet they are more immediate for emerging markets. for instance, the share of food in the typical consumption basket is higher in these economies than in advanced economies. the average weights of food in the consumer price index in emerging market countries and in developed countries are around 30 % and 13 % respectively. besides, especially for the net importers of commodities, high and volatile prices pose significant risks on balance of payments and sustainability of growth in developing countries. there are nominal and real factors that affect commodity price developments. the most important real factor is due to the low price elasticity of not only supply of but also demand for these items. because of low elasticity, a minor change in supply has the potential to affect market prices significantly. likewise, a minor change in future real growth prospects has the effect of shifting the demand with a potential of large market price changes. this explains the real sources of commodity price volatility which is recently observed. regarding nominal sources of volatility, most commonly cited explanations are related to monetary policies of major central banks and the structure of financial markets in commodities. i will elaborate more on real factors that is the lack of sufficient real supply increase in order to meet booming real demand from the developing world. the high growth potential in developing countries suggests that demand pressures are likely to stay with us over the years to come. combined with the massive financial flows fueled by the exceptionally loose monetary policies, commodity price volatility will probably remain as a major