markets, including turkey, has the potential to exacerbate the divergence between the pace of recovery in the domestic and external demand. if this pattern of growth coexists with rapid credit expansion and deterioration in the current account balance, it may lead to financial stability concerns. these developments make it essential to effectively utilize policy instruments other than policy rates. consequently, in today ’ s challenging financial environment, which is likely to persist in the foreseeable future, the central bank of turkey underscored four basic principles upon which the monetary policies would be built to maintain financial stability. the first one is to discourage excessive leverage and keeping the debt ratios of banks and the corporate sector at modest levels. the second principle is extending the duration of borrowing for private and public sector, as well as household deposits. the third principle is strengthening the fx position of both the public and private sector, which is usually the achilles ’ heel for emerging economies with sizable current account deficit. the fourth principle is better management of foreign currency risk by the corporate sector through instruments like the turkish derivative exchange. in november 2010, we have started quantitative tightening to deal with rapidly increasing macro imbalances driven by short term capital inflows and acceleration in credit growth. to that end we have raised required reserve ratios to control the rapid credit expansion by restricting the supply of loanable funds. another issue we considered is lengthening the maturity of capital inflows. this is important for improving the quality of capital account, limiting maturity mismatches, and avoiding exchange rate misalignments. to this end, we lowered the policy rate and widened the corridor between overnight borrowing and lending rates so as to create some extra volatility in the short - term interest rates. although it looks quite complicated at first sight, the framework we adopt in spirit is not significantly different from the conventional inflation targeting framework. the only difference is that, previously our policy instrument was the one week repo rate, but now our instrument is a “ policy mix ” — which consists of a combination of short term interest rates, reserve requirement ratios and interest corridor. we seek to use these instruments in right combination in order to cope with both inflation and macro - financial risks. the monetary policy stance in this framework is not only determined by the path of policy rates, but as a mixture of all policy instruments outlined above. just like the conventional inflation targeting framework, the policy is forward looking and contingent on the economic outlook. the exact bis central bankers ’ speeches setting

the banka slovenije was invited to participate in selected activities of the european system of central banks and the ecb at various levels. since 2004, the colleagues from banka slovenije have attended numerous working groups and committees and thus contributed to our work. governor mitja gaspari has been a member of the general council of the ecb since may 2004. since august 2006 he attended the meetings of the governing council as an observer, and became official member of this decision - making body for monetary policy in the euro area on 1 january 2007. once the eu council had taken the decision to abrogate the derogation of slovenia, thus paving the way for the introduction of the euro, the ecb and banka slovenije, together with the national changeover board, the european commission and national and international authorities cooperated closely in many ways for preparing the adoption of the euro. as a result today we can celebrate the successful cash changeover. i am sure that the good working relationship between the banka slovenije and the ecb will also continue in the future and will even become closer as the banka slovenije is now a fully integrated part of the eurosystem. as you may know, close cooperation between the national central banks of the eurosystem, the escb and the ecb is essential for our work and crucial to ensure the success of the single monetary policy in the euro area. from now on slovenia will enjoy the general benefits of participation in the single currency area, such as no exchange rate risks with respect to its most important trade partners and price transparency, which will promote trade. it will also benefit from the stability oriented policy of the ecb, which will help anchor inflation expectations. furthermore, as slovenia is a small open economy, adopting the euro provides considerable protection against international financial disturbances, which often have a disproportional effect on smaller economies. all this will translate into strong growth and job creation over time. nevertheless, in order to reap the benefits of participation in the single currency area to the greatest extent possible, slovenia ( as all countries that are members of the euro area ) needs to ensure appropriate national policies, in particular fiscal and structural policies, as well as appropriate wage developments. this will, in turn, help to maintain price stability in slovenia and to preserve its competitiveness and growth. certainly, in the first period of the changeover there have been concerns arising related to price rises in