On the other hand, the Bank will allow flexibility on its Net Domestic Assets, whenever unexpected negative developments emerge in the financial system. Moreover, the Central Bank will resort to use short-term interest rates  BIS Review 35/2001  3  efficiently as a monetary policy instrument through reducing Net Domestic Assets, should disinflation process be endangered by foreign exchange movements. Dear Shareholders, Distinguished Guests and Valuable Press Members, Now let me go into some details of the Draft-Law Amending the Central Bank Act, which will have a greater impact on the macro-economic policies in Turkey in the medium- and long-term. As you know, the Draft-Law, which has already been approved by the Planning and Budget Commission at the Parliament, will be debated in the Parliament’s General Assembly, probably today. The Draft-Law was prepared by taking account of economic developments of the last 31 years since the enactment of the Central Bank Act No: 1211 on 14 January 1970, and the central banking norms agreed by the European Union. According to the Draft-Law, ensuring price stability becomes the primary objective of the Central Bank. The Central Bank will have the exclusive power and responsibility in designing and pursuing its monetary policy. The new Law will enable the Bank to choose and to use its monetary policy and instruments independently. If the Draft-Law is ratified in the Parliament just as adopted in the Commission, a Monetary Policy Committee will be established.
However, from Q4 this year we will make adjustments to our approach to the composition of this portfolio in order to incentivise companies to take actions contributing to an orderly transition to a net–zero economy. Given the relatively small scale of these holdings – in the context of sterling and global capital markets – we hope this change will by example influence how larger investors take account of climate risks in their own asset allocation decisions. Some may worry this change moves us away from central banks’ core responsibilities, into territory best left for governments. However, the case for taking this action is clear, it is in line with the change in the MPC’s remit I described earlier, and far from impeding the effective execution of our policy objectives, it may well contribute to a future outcome that delivers a more stable monetary and financial system. Conclusion I have spoken about the relevance of climate change and the transition to a net-zero economy to central banks. It is about faithfully executing our mission for monetary and financial stability, taking into account those structural shifts on the horizon. That brings with it several analytical challenges and demands new ways of thinking – we welcome this. But it is clear that the biggest component of the journey to net-zero rests not with central banks, but with government, through the delivery of sector-level climate policy pathways – without these the real economy cannot adjust effectively.