durmus yilmaz : financial security and stability speech by mr durmus yilmaz, governor of the central bank of the republic of turkey, at the forum “ measuring and fostering the progress of societies : the oecd world forum on statistics, knowledge and policy ”, istanbul, 28 june 2007. * * * dear guests, i would first like to welcome you all to istanbul, the city where the two continents meet. and today it is so delightful to see that it is a meeting point for high level delegates from all the continents. in that regard, it is a great pleasure for me to be given the opportunity to share my views on financial stability and security with such a distinguished audience. today, i would like to begin my speech by underlining the importance of financial stability, why and how we should keep an eye on the stability of the financial system, including the turkish perspective. finally, i will try to emphasize the interrelatedness between financial security and stability. importance of financial stability … as a result of the liberalization and deregulation processes, financial markets became more integrated and underwent radical transformation, starting, in fact, with developed countries in the late 70 ’ s and spreading to developing countries in the 80 ’ s and 90 ’ s. at the same period, capital movements were seen to have accelerated and reached to high levels. this, in turn, led to financial innovation and heavy use of sophisticated instruments. the degree of sophistication in financial markets urge all market participants to increase their focus on risk management and policy makers to monitor closely the developments and identify risks in these markets. this shift in market participants ’ perceptions is particularly important, considering the lessons derived from painful experiences of crises, which especially occurred during the last two decades all around the world. these lessons taught us how costly and disruptive financial instability can be and how effective risk management can be to avoid adverse conditions in advance. even though there is no consensus on how to define financial stability, its importance is widely accepted. due to the financial crises experienced on the road to globalization, along with financial liberalization and technological improvements, “ financial stability ” in line with the target of achieving price stability, has become one of the leading policy issues of central banks. however, i should point out that, although price stability has a commonly accepted and clear definition, i can say that it is much more difficult to define financial stability. the european central bank defines financial stability as the financial system capability

emerging technologies possess the potential to revolutionize financial services, making them faster, more efficient, and more secure. notwithstanding this promise, challenges remain in their application to critical financial market infrastructures whose operational integrity represent a non - negotiable pre - requisite for our financial system. as we enhance existing services or develop new ones, our consideration of new technologies must strike an appropriate balance to ensure the risks are thoroughly 4 / 5 bis central bankers'speeches understood before their transformative potential is realized. in pursuing this suite of initiatives straddling the wholesale services, we seek to advance both the interests of customers and policy makers during this era of unprecedented challenge and change. standing before you today convicts me that our success as stewards of this business depends absolutely upon our active engagement with the depository institutions and end users to which we are operationally accountable. across this sphere and all others, either intentionally we are progressing or inevitably we are regressing ; there is no idleness. thank you for your generous attention today. i ’ d be pleased to respond to a few questions. 5 / 5 bis central bankers'speeches