ease banks ’ reluctance as it partially reduces the risk involved in lending. however, collateral may play a limited role in the case of small and medium size enterprises since they are less likely to possess appropriate collateral. in order to improve exchange of information on credit history of a borrower, regulators of many countries have actively involved in setting up public credit bureaus. in turkey, the central bank took the lead in setting up the risk center of turkey in 1951. the risk center has been operating within the central bank since then. this database enables to prevent extension of credit to a person or legal entity exceeding its payment capacity. applications are based on data exchange on loan limit and risk information on bank customers, protested bills information, identity information of the customers subject to non - performing consumer loan and credit card, and loan limit and risk information on customers of financial leasing companies and factoring companies. currently we are at the process of transferring the risk center unit to the banks association of turkey. a separate and private company was also set up by private banks in 1995 as credit bureau to respond to the demands of the financial community. the credit bureau promotes the exchange of information among financial institutions about the credit history of potential customers. i should also emphasize the importance of the new capital accord, the basel - ii. along with the implementation of basel - ii, the access of small and medium size enterprises to bank credit will depend heavily on their financial and organizational structures. according to the new accord, those enterprises that adhere to sound corporate governance principles will have an advantage in access to cheaper finance through banking sector. they will also have better access to finance if they improve their financial disclosure standards. hence, it is imperative for small and medium size enterprises to take the necessary steps and prepare themselves for the requirements of the basel - ii without any delay. at this point, i would like to briefly touch another obstacle that hinders access to capital : fiscal dominance. due to high level of public sector borrowing requirements in many emerging market countries, fiscal policy ultimately governs price determination in financial markets. fiscal dominance reduces the amount of loanable funds available to private sector and disrupts effective credit allocation in the economy. turkey can be seen as a case study. years of high real interest rates and budget deficits in the 1990s forced the turkish banking sector to credit rationing. banks were not able to perform their intermediary function effectively. instead, they mostly financed public sector deficits. fiscal dominance has gradually eased following the reform program enacted after

rapid gains in house prices. this growth has had to rest on the backs of just a few interest - sensitive sectors — business investment, consumer durables, and housing. from this perspective, it ’ s not all that surprising that housing markets have been hot. my point is that to offset the “ drags ” we ’ ve needed to give the economy a strong dose of stimulus — which inevitably boosted the housing sector. as i ’ ve discussed, if a sizable reversal in house prices were to occur, it probably would affect the economy mainly through the lagged effects of declines in wealth and increases in interest rates, rather than through widespread financial disruptions. this would give monetary policy time to react to any resulting economic weakness by lowering interest rates. in addition, the magnitude of the potential house price overvaluation may be only around half that of the earlier stock market overvaluation. in conclusion, policy still appears to be somewhat accommodative, and given the recent inflation performance and the dwindling of slack, it makes sense to continue the process of removing that accommodation. i hope i ’ ve provided you with some insight on the issues that i think are important to focus on as the fed goes through this process. i look forward to taking your questions. this bis review is available on the bis website at www. bis. org.