Durmuş Yilmaz: Central banking in emerging economies – the Turkish experience Speech by Mr Durmuş Yilmaz, Governor of the Central Bank of the Republic of Turkey, at the “International Conference on Economics”, Ankara, 12 September 2006. *  *  *  Dear professors, colleagues, and guests, I am very pleased to participate in such a conference covering a broad range of economic issues and attended by many distinguished academicians from different countries. It is also a great pleasure to deliver a speech on the topic of central banking in emerging economies and the Turkish experience. Dear guests, Given the wide range of issues related to central banking in emerging economies and the limited time available, I have decided to limit the extent of my remarks today. I’d like to talk about the challenges we face as today’s central bankers in emerging market countries, mainly in the context of the Turkish experience. However, before embarking on this subject, let me first of all step back and take a look at the evolution of central banking, especially in the recent past. There is no doubt about that throughout the 20th century, central banking has undergone a tremendous transformation both in numerical terms and institutional aspects. At the beginning of the last century, for example, there were just 15 central banks in the world.
Of course, the Board has to be duly informed, and some of their members should have the necessary expertise to assess these risks. Needless to say, it is not only banks that need to “catch up”; we are also working at the Banco de España to adapt to this reality. I believe it is fair to acknowledge that this is all very new for everyone in the banking sector, including certainly Central Banks and Supervisors. What are we doing? Firstly, we have created an internal function entrusted with assessing the impact we as an institution have on the environment. The aim is to identify and coordinate the necessary measures to reduce that impact. Secondly, as a macroprudential supervisor, we clearly need to be able to assess and quantify the risks that the transition towards a more sustainable economy poses, both for individual banks and the financial sector as a whole. We must be able to perform stress tests for the financial system overall and define scenarios to be applied by banks individually. 4/5  Accordingly, we are designing internal governance structures and methodologies, actively participating in the cultural shift in the SSM supervisory model. Naturally, we are also evaluating the information and data requirements needed to address this challenge. Thirdly, as investors in the debt markets, we are working to include environmental risk assessment in our credit analysis. A fourth key element is our responsibility as supervisors. We must foster the implementation of these changes in the financial sector. We cannot wait for change to occur.