That date is, to an extent, at the discretion of the national authorities. This approach builds on the premise that the considerable benefits of a currency union can only materialise when a close similarity exists with other euro area participants and a high degree of convergence has been attained with them. When this point has been reached, a prospective new member is much less susceptible to shocks which are not common to other members. This ensures that the monetary policy of the European Central Bank (ECB) is equally suitable for all euro area members - old and new. The two Cabinet meetings held recently assessed Malta's state of readiness in this regard, on the basis of a report prepared jointly by the Central Bank of Malta and the Ministry of Finance. The meetings also discussed issues related to Malta's participation in the exchange rate mechanism, also known as ERM II. The first decision which has to be made in fact concerns the timing and method of participation in ERM II because a Member State cannot adopt the euro without having successfully spent a minimum period of two years in this mechanism. While this decision is taken in a multilateral context involving various EU authorities, Member States and the ECB, the Maltese authorities nevertheless need to have a position. The Central Bank of Malta contributes to the formation of that position through its role as advisor to the Minister of Finance on financial and economic matters.
The Banking Sector Restructuring Program and other measures that were taken following the 2001 crisis, led to the formation of a very strong and resilient financial system. This contributed to the high growth rates achieved after the crisis. I can comfortably say that today the banking sector in Turkey compares well with those of new members of the European Union. The Banking Law enacted in 2005 is in line with the best international practices. Asset size of the Turkish banking sector increased by more than three-folds in the last six years and reached USD 500 billion as of 2007. Still, there is a huge and unexplored potential in the sector taking into account the size of Turkey’s young population and low rate of credit utilization among households and private business. Capital adequacy ratio (CAR) of the banking sector stood at 18.8%, well above the minimum legal requirement of 8% and the average of the European Union, which is 12.1%. Short-term liquidity ratios comfortably meet the legal thresholds. Thanks to sound and resilient structure of the sector, foreign direct investment to the Turkish banking system has surged since 2005 and the share of foreign investors in the total capital of the sector is now more than 40%. Rather than financing government deficits, the banking sector has returned to its core function, which is being intermediary between borrowers and lenders.