As the European Central Bank president, Mr. Jean-Claude Trichet has recently underlined “the international interdependencies are too large for purely national or regional rules to be optimal and there is a clear need to strengthen global governance, in particular in the financial field”. In the case of the European Union, the crisis has exposed fundamental weaknesses of the European economy, revealing growing internal imbalances. The functioning of the European  BIS central bankers’ speeches  1  Monetary Union has been under particular stress as the existing surveillance procedures proved to be not comprehensive enough. Therefore, more effective economic governance in the European Union and the euro area is seen as achievable through five main pillars: fiscal discipline, broader economic surveillance, closer coordination, a robust framework for crisis management, stronger institutions and rules-based decision making. At this point, let me say that just recently the European Union has taken important decisions to ensure that Member States coordinate their economic policies more closely. The new economic governance is therefore based on three main responses to the crisis: •  reinforcing the common economic agenda with closer European Union surveillance  •  safeguarding the euro area stability  •  and repairing the financial sector  As a result of these decisions, the EU’s interdependent economies will be better placed to chart a path to growth and job creation. To conclude, I would like to emphasize here that economic governance is a topic that concerns us all.
Now let me touch briefly on risk management in Turkey’s banking sector. From the risk management standpoint, we are well supplied with well-developed methods for managing risk and supervising the risks that we do accept. As to the financial standing of Turkey’s banking sector, Turkish banks have achieved a level of financial and institutional development not to be underestimated. But besides these strengths, there are various threats to the well-being of the Turkish banking sector which should be mentioned. Turkish banks, are mostly exposed to credit risk, liquidity risk, interest rate risk, and foreign exchange risk. This is true even when there is no global crisis or macroeconomic risks stemming from political uncertainty. I should mention that all these different kinds of risk have been thoroughly monitored by the supervisory authorities, who put preventive measures in place before the effects of any problems that were found could threaten financial stability. Under this regulatory system, the banks must submit annual, quarterly, BIS Review 41/1999  4  and even daily financial data to the Central Bank and the Treasury. And besides frequent financial evaluations of banks by off-site examiners, on-site examinations are conducted to verify the accuracy and reliability of the data reported and clarify any special issues found during off-site examinations. Let me conclude my remarks by underlining once again how important it is to assess, manage, and reduce financial risks to ensure a sound financial system.