Fourthly, is reinforcing buffers to withstand future shocks. This is a key area of the international reform package that aims to significantly raise the resilience of the international financial system and to promote sound risk-taking activities. The standards will see financial institutions holding larger amounts of capital, including buffers which can be drawn down as losses occur. At the same time, the standards will also require banking institutions to significantly strengthen their liquidity and funding positions. Collectively, these standards aim to strengthen the banking institutions’ ability to continue to support orderly credit intermediation, particularly during periods of instability. While carrying more equity entails greater costs of capital for banks especially in the short-term, this investment will support a more stable financial system and overall global economy as well as build the confidence of consumers and investors, particularly during periods of stress. In view of these imperatives, this is a timely juncture for the industry to reflect and take charge of the efforts to rebuild and strengthen the foundations for more sustainable finance. Critical to this is the realisation that the creation of long-term shareholder value is consistent with, and not at odds with prudent risk taking and responsible business practices. Indeed, financial institutions with a regional footprint in ASEAN have the potential to contribute to the development of the financial systems in countries where they operate. There will be tremendous payoffs to be reaped from pursuing such sustainable strategies.
Esteemed participants, In terms of the structural transformation programs, financial sector, owing to its significance, is the sector that is most and fastest affected from the process, as well as being the leading sector in terms of supporting the process. Accordingly, further steps need to be taken in this sector in the process of falling inflation. Dear audience, The third factor I will be conveying to you today within the context of the effects of falling inflation on the economy is that, together with falling and foreseeable inflation, prices resume their signaling task in the economy and thus their roles as indicators in the allocation of resources. Departing from the example of Turkey, as we all know from the past experience of chronic inflation, consumers used to be inclined to make less price and quality controls, and attach less significance to diversity in their choices of goods. Producers on the other hand, used to set their profit margins freely to a large extent, paying little attention to their pricing, the costs and productivity. They also showed little interest in making investments for increasing the diversity of their products by adding them new ones. As a result of this structure, the quality of production declined in time, global competitiveness of our country weakened and integration with the world economy was delayed. Nevertheless, with the absolute as well as the relative prices resuming their signaling task following the decline in inflation, the behavior patterns of producers and consumers in Turkey began to change.