Under the assumptions regarding liquidity stated above, the Central Bank’s 2007 liquidity management strategy will be as follows: (i)  The Central Bank will continue to announce overnight borrowing and lending interest rates between 10:00-12:00 and 13:00-16:00 in the Interbank Money Market within the CBRT. In case of a liquidity shortage during the day, banks will be able to borrow at the Central Bank’s lending rate against collateral within their limits. In the event of a fall in interest rates due to increasing liquidity, banks will be able to lend New Turkish Lira to the Central Bank at the Central Bank’s borrowing rate. (ii)  The Central Bank will continue to provide the Late Liquidity Window Facility in the Interbank Money Market within the CBRT between 16:00-16:30 such that banks may borrow from or lend to the Central Bank against collateral without any limit. (iii)  In case of a temporary or permanent liquidity shortage, the Central Bank will continue to carry out liquidity management through one-week repo auctions. When there is liquidity shortage in the market, the Central Bank will announce the amount of repo auction for that day on Reuters’ CBTF page at 10.00. While determining the amounts of the auction, the Central Bank - as long as no extraordinary fluctuations are observed in the market - will endeavor to maintain the average auction interest rate; a.
Finally, I should mention the agreement reached to introduce a new supervisory instrument, the leverage ratio, which is not directly linked to a bank’s level of risk; for this reason, it counters to some extent the potential shortcomings present in internal models for calculating capital needs. That leads us to one of the major issues currently under consideration: the use of internal models for evaluating the weighting of risks. There is known to be wide-ranging variability in the calculation of risk-weighted assets across different banks. The Basel Committee itself has published a report on this matter, and increasing numbers of experts and regulators deem it advisable to study the implications of the use of internal models in terms of how they affect the lack of transparency in the calculation of capital requirements and in order to ensure a level playing field for all banks. The prudential regime of systemic banks: more capital and a resolution framework A further aim of the FSB has been to eradicate, or at least alleviate, the externalities created by systemic “too-big-to-fail” institutions. Systemic banks are those which, given their interrelatedness, size and complexity, might entail, in the event of bankruptcy and disorderly liquidation, serious difficulties for the rest of the financial system. The systemic repercussions of the collapse of a bank of such characteristics, as evidenced following the Lehman Brothers bankruptcy, was the driving force behind the authorities having subsequently to bail out other institutions, with the ensuing burden on public funds.