sureyya serdengecti : financial stability and implications of basel ii opening speech by mr sureyya serdengecti, governor of the central bank of the republic of turkey, at the conference on “ financial stability and implications of basel ii ”, istanbul, 16 may 2005. * * * financial stability minister, governors, academicians, guests etc., i would like to welcome you to istanbul today and thank you all for your participation in this conference. it is an honor for me to host such distinguished speakers and participants in istanbul. one of the features of the world economy back in the 90 ’ s was the financial liberalization of economies. the ambitious macroeconomic policies of many countries aiming at liberalizing capital accounts, started in fact with developed countries in the late 70 ’ s and spread to developing countries in the late 80 ’ s and 90 ’ s. another feature of the world economy in the 90 ’ s was the acceleration of capital movements around the world, which i would say is also an outcome of the financial liberalization policies. the comprehensive technological progress in areas of information, communication and computing also highly promoted this active movement of capital across national borders. this impressive change in the global economic environment since the 80s has resulted in important changes in global financial markets. as the figures indicated, during this period, the global financial sector in general and the banking sector in particular developed much more than the real sector did. new financial instruments that were designed for firms ’ financing needs provided new opportunities for companies. hedging markets developed rapidly. all in all, financial engineering emerged as a new area of knowledge. dear guests, the aggressive capital movements among countries and developments in financial markets generated a number of economic benefits at the global level. when borders between countries have disappeared in favor of capital flows, funds flew to regions where capital had the highest return. so, it has been observed that competitiveness and productivity of capital in global scale increased considerably in the 90s. there has been also a substantial rise in the volume of global merchandise trade. however, all developments that i mentioned now represent only the front side of the medallion. the back of the medallion has not been as bright as the front. in the 90 ’ s, not only the scope, timing and speed of the financial liberalization varied across countries, but also the consequences of economic policies had various effects on national economies, depending on the initial conditions and country specific factors. hence, the rapid increase in capital movements among countries shook the financial

##fs available, we can also see how it has evolved over the years. as you know the strategies which can be delivered through an etf offering is impressively wide being subject only to the important safeguard of the ucits requirements. over time, we have seen the trends in etfs seeking authorisation change considerably. these have moved from being simple market cap weighted index 1 / 6 bis - central bankers'speeches tracking etfs to a full complement of strategies – a lot of them index based which reflect investor needs. ranging from so - called " smart beta " etfs, to thematics, to etfs delivering volatility or commodity exposure. we have also seen other etf products often tailored towards the latest topic of focus. present today, a prevailing trend is the rise in actively managed etfs seeking authorisation. some factors behind this include ease of access for investors, investor demand for targeted active strategies, fee compression and the ability to capitalise on existing scale by the creation of an etf share class to facilitate an additional distribution strategy. we are seeing etf providers continuing to adapt to changing demands and a changing environment to serve investor needs. as a regulator, the central bank must also be cognisant of the changing environment that we all operate in. i am aware that portfolio transparency is an important issue that has been raised by industry, particularly in relation to active etfs and for further innovation in the sector. while this is still a relatively small part of the market, we note the increasing interest in europe in these products. as a leader in europe for etfs, the central bank is open to engaging with industry to develop a proportionate and effective approach to different models of portfolio transparency in our domestic framework. we are likely to settle on a principles based approach rather than focusing on one particular model. another topic that garnered interest recently is the move of us securities settlement to t + 1. in the lead up to implementation of the new settlement requirement, which became effective on 28 may 2024, there was much discussion about its potential impact on etfs. this was particularly focused on ucits cash and borrowing limit breaches. there was engagement on the topic at both an eu and local level. locally, we engaged with industry to ascertain preparedness for the new settlement cycle and to inform our view on potential impacts or risks. we saw that much of industry is preparing for this change and that t + 1 is already a feature of many primary market settlement cycles. this would