erdem basci : central bank responsibilities, global financial stability and payment systems opening remarks by mr erdem basci, governor of the central bank of the republic of turkey, at the “ payment systems conference ”, organized by al bank wal mustathmer group, istanbul, 5 december 2012. * * * distinguished governors of the central banks, distinguished guests and esteemed members of the press, i would like to thank you all on behalf of the central bank of the republic of turkey and myself for your participation in the “ payment systems conference ” organized by al bank wal mustathmer group. welcome to istanbul and turkey. participants to the conference, who are all experts in the field, will be discussing payment systems, their significance and contemporary approaches. before moving onto the topic of payment systems, i would like to briefly mention the main responsibility areas of central banks. distinguished guests, price stability, financial stability and the development of the financial sector are three significant fields central banks are responsible for, either partially or fully. the primary objective is price stability. the social costs to be incurred from the loss of price stability have been thoroughly understood by economists. academic studies indicate that an inflation rate that is on average higher by 10 percentage points may cause, on average, a quarter point decrease in the long term growth rates of the countries. 1 while the average inflation rate in turkey during 1974 – 2003 – the period with chronically high inflation rates – was 56 % ; average real growth per person was a mere 2 %. on the other hand, during the period of 2004 – 2011, when inflation was expressed with single digits, average real growth per person increased to 3. 3 %. our inflation target for the 2013 – 2015 period is set as 5 %. loans, exchange rates and inflation expectations are three crucial variables that are the determinants of price stability. therefore, decreasing excessive volatility in the credit growth rate and exchange rates highly contributes to price stability. the second area of central bank responsibility is financial stability. the loss of financial stability has deep and long - term impacts on both growth and employment. 2 the cost of preventing a financial crisis is much lower than the cost of the crisis itself. turkey ’ s recent history is a very good example of this statement. the economic crisis turkey went through in 2001 increased the country ’ s sovereign debt by 30 percentage points and severely affected growth and employment prospects. as of 2002, turkey focused on establishing price stability, financial stability and introducing structural reforms

economies including turkey declared their intention to contribute to global financial stability by increasing the resources of the imf. the central bank of the republic of turkey intends to contribute to imf resources up to usd 5 billion, which will be counted as part of turkey ’ s international reserves. the duties and responsibilities of central banks with regard to payment systems have to do with the development of the financial sector, which is the third main field. efficient payment systems contribute to the deepening of financial markets by decreasing operation costs and settlement risks. therefore, the active role assumed by central banks in the design, operation and oversight of payment systems becomes more crucial given the size of the global financial system. hence, in line with the global trends in this field, the central bank of the republic of turkey cooperates with the turkish financial system for the advancement of payment systems. in this regard, significant progress has been made in the restructuring of payment systems operating under the auspices of the central bank. the oversight of payment systems operating outside the central bank also rests with our bank. considering the need for a regulation on general standards including all payment services and systems in turkey, the bank prepared a “ draft law on payment systems ”, which also complies with the european union acquits, and the draft law has been submitted to the relevant institutions and agencies to hear their views. once the draft law has been addressed at the grand national assembly of turkey and as soon as the law has been revised in line with the views of the relevant institutions, an important step will be taken to reshape the legal framework on payment systems in harmony with the international standards. esteemed guests, the central bank ’ s membership of the committee on payment and settlement systems ( cpss ) of the bank for international settlements ( bis ) was finalized in 2009. in this platform setting key global principles and standards related to payment and settlement systems turkey is represented by the central bank, which is actively involved in the studies conducted. in parallel with the said efforts, a joint study was carried out with the committee on payment settlement systems ( cpss ) and international organization of securities bis central bankers ’ speeches commissions ( iosco ) and “ principles for financial markets infrastructures ( fmi ) ”, which covers payment systems of systemic significance, settlement systems for securities, central custodians, central counterparties and transaction registry centers. this study was published in april 2012. the said study outlines 24 principles for the relevant authorities of fmis and 5 key responsibilities for