In fact, central banks’ role in times of financial instability is not a new issue for the economic literature. The term “lender of last resort” originated in the writing of Sir Francis Baring in 1797. In his book, “Observations on the Establishment of the Bank of England”, Sir Baring referred to the Bank of  3  Aninat, Eduardo. (2003). Foreword. Challenges to Central Banking from Globalized Financial Systems. IMF. 4  Schuerman T. (2004). Why Were Banks Better off in the 2001 Recession? Current Issues in Economics and Finance. FEDNY. Vol. 10. No: 1. 2  BIS Review 38/2005  England as “the dernier resort” from which all banks could obtain liquidity in times of crises. But the concept of lender of last resort had been described and used in a more comprehensive manner by both Henry Thornton in 1802 and Walter Bagehot in 1873. Distinguished Guests, I will add a point to the discussion that the benefit of having a strong financial system in an economy eliminates the ground for conflict in policies between financial stability and price stability. Since a strong financial system increases the efficiency of monetary policy on one side, it also provides elasticity for the economy to overcome external shocks easier on another. On the other hand, it is almost impossible to attain financial stability in the long run without maintaining price stability. Furthermore, price stability attained through credible monetary policies is an advantage in times of increasing uncertainty in the financial system and financial imbalances.
Süreyya Serdengeçti: Financial stability and implications of Basel II Opening speech by Mr Süreyya Serdengeçti, 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.