in and year out. 2. supervision of individual firms one of the things that should not be neglected is that the severity of this crisis was as great as it was partly because a large handful of individual massive firms failed due to poor management and weak balance sheets. part of the solution lies, therefore, in much better microprudential supervision and regulation of individual firms. the basel committee has had core principles for effective banking supervision for some considerable time now. but, going beyond that, the fsb has encouraged and is sponsoring an exercise on effective supervision of sifis, significantly important financial institutions. a remarkable fact is that although the style of banking supervision varies enormously across the world, almost nothing seems to have been done to get to the bottom of the question of which approaches are the more effective – having an army of on - site examiners, such as for example in the united states ; or relying on offsite analysis, which tends to be the pattern in much of europe. an exercise led by julie dickson for the financial stability board is producing an evaluation of what is needed to supervise the largest firms in the world effectively. the idea is that that will either get encapsulated in an fsb code or in a re - draft of the basel core principles for effective supervision. 3. capital and liquidity the third element is capital and liquidity. virtually all crises have at their root over leverage in the financial sector and excessive maturity mismatch. we need to overhaul the corresponding policy instruments – capital and liquidity requirements. on liquidity, basel is introducing an accord for minimum liquidity requirements for the first time ; this is about a quarter of a century after it was first contemplated and so rather overdue, but therefore very welcome. there is an awful lot of debate around this still. many in the industry – in the banking industry – have been resisting it. but this will happen. it will lay down minimum standards for banks to hold some resiliently liquid assets and about the funding of illiquid assets. to date, much more prominent has been the work on capital. although there has been some dilution of the proposals from a few months ago, real substantive progress is being made in reforming the minimum standards and in introducing various buffers, taking into account credit cycle conditions and the circumstances of sifis. the key element of the overall package is that “ capital ” will mean capital. the world of hybrid instruments – pretending to be so - called capital instruments

##itical tensions, precious metal and oil prices also soared significantly, compared to the previous reporting period. while global disinflation remained on track, inflation was above the targets in many economies. the stickiness of services inflation and geopolitical developments are impeding the disinflation process. while headline inflation receded to near - target levels in some emerging economies, it remained significantly above the targets in others. meanwhile, in advanced economies, the decline in headline inflation was replaced by a flatter course, and core inflation continued to fall. against this backdrop, expectations have strengthened that the central banks of advanced economies will cut interest rates later and at a slower pace compared to the previous reporting period. as seen on the graph, the flattening of the market - implied policy rate path was more pronounced for the fed. this divergence increases global uncertainty and puts pressure on the currencies of emerging economies. accordingly, we consider that the central banks of emerging economies will be more prudent in cutting interest rates. these developments led to a decline in the global risk appetite as well as portfolio outflows from emerging economies in the recent period. macroeconomic outlook distinguished guests, now i would like to share with you our observations on macroeconomic developments in turkiye. 2 / 12 bis - central bankers'speeches data for the last quarter of 2023 indicate that the annual contribution of domestic demand to economic activity declined. meanwhile, the negative contribution of net exports decreased in this period. in the first quarter of 2024, domestic demand is still resilient. retail sales and trade sales volume indices, and card spending pointed to an acceleration in consumption in the first quarter. on the other hand, despite some uncertainty due to the religious holiday, leading indicators for the second quarter suggest a milder outlook for domestic demand compared to the first quarter. while card spending weakened in real terms in april, manufacturing firms'expectations for future domestic orders continued to decline on a quarterly basis. similarly, interviews with firms in april confirmed this outlook. on the other hand, imports of consumption goods diverged from this trend by recording an increase in april. in this respect, we closely monitor the impact of monetary tightening on domestic demand using a variety of indicators. compared to the outlook i summarized for domestic demand, domestic production has been on a milder course. as of february, industrial production increased on a quarterly basis, but this increase seems to be more limited when highly volatile sectors are excluded. the services production