Nor does it seem feasible that further substantial contributions of private capital will be forthcoming if the tensions on international financial markets do not subside. From an overall perspective the Spanish system is in a position to overcome all these challenges, though as I have reiterated, talk of immunity is completely out of place. Indeed, not all banks are in the same position when it comes to coping with the tensions. This is because they have pursued different lending policies over recent years in terms of the rate of expansion of loans and of the degree of risk concentration. Even among banks that have followed similar strategies, notable differences can be identified regarding the selection of specific risks, their ability to manage them and the buffers, in terms of profitability and solvency, available to them to alleviate the effects of any risks that may materialise. For all these reasons banks should make the changes necessary to adapt to the new circumstances. These changes unavoidably involve stepping up efforts to rationalise operating costs and to correct the overcapacity in the sector which arises from a worldwide tendency towards lower levels of leverage. 8  BIS Review 79/2009  This overcapacity in the banking industry should be tackled through restructuring processes that allow a sound and efficient financial intermediation system to take root.
As to liquidity risk, the fact that depositors prefer shorter terms, while investors, driven by expectations of high inflation and uncertainty, prefer longer terms, has caused a mismatching of the maturity structures of the assets and liabilities of the banking sector. As a result, banks become more vulnerable to liquidity risk. Financial distress and global financial crisis were the main ingredients of the conjuncture of 1998. Following scattered failures in the emerging financial environment, almost all emerging economies began to be treated as risky, due to growing uncertainty about the near-term outlook for the financial markets. In this situation, international investors became more cautious about investing in the emerging markets and became reluctant to provide them with credit. Turkish banks slowed their disbursements of credit, preferring to be liquid in the marketplace. We also checked using different ratios for the liquidity in the system. Interest rate risk is another important form of systemic risk. Since the maturity structure of interest-sensitive liabilities in the Turkish banking system tends to favor the relatively shorter maturity segments, external funds are repriced at shorter intervals than assets. This mismatch in the pricing structure at various periods increases the sensitivity of assets and liabilities to changes in interest rates. Banks manage the degree of interest rate risk to which they are exposed during times of rising interest rates by converting their low interest bearing securities into high interest bearing securities by means of repurchase transactions. Interest rate swaps and some other derivative instruments are also used to hedge interest rate risk.