Durmuş Yilmaz: Financial Stability Report – II Speech by Mr Durmuş Yilmaz, Governor of the Central Bank of the Republic of Turkey, at the presentation of the “Financial Stability Report – II”, Ankara, 13 June 2006. *  *  *  Distinguished Guests, Dear Members of the Press, Last August, we shared with you the first Financial Stability Report, which we consider to be supportive of price stability, our primary objective, and involves a compilation of our studies on the evaluations of financial stability. I am happy to present the second report to you today. I would also like to remind you that this report will be on the Bank’s web page as of today. Today, I would firstly like to focus on the definition and significance of financial stability and central banks’ approaches to the issue. Then I will touch on the duties and powers of the Bank regarding financial stability. Lastly, I would like to emphasize the main points in the Financial Stability Report. Distinguished Guests, Providing a clear definition of financial stability is as difficult as achieving and maintaining it. In a broader sense, financial stability can be defined as the condition of an economy’s mechanisms for pricing, allocating resources and managing financial risks functioning well enough to contribute to the performance of the economy. 1 The European Central Bank defines financial stability as a condition whereby the financial system is able to withstand shocks without impairing the transformation of savings to investment opportunities.
The third step is the resolution of banks, applied by the Bank of Albania in view of the new mandate. Similar to recovery plans, the resolution plans drafted by the Bank of Albania aim to identify the legal and structural obstacles and difficulties with financial resources that banks face, toward resolvability. In this regard, the resolution plans are one of the key instruments to facilitate the Bank of Albania’s resolution implementation. This year in April, the Bank of Albania approved a bylaw that defines the content of resolution plans. Then banks were required to report a broad set of data for drafting these plans, based on the model of the European Banking Authority and we are currently in the process of drafting them. The drafting of the banks resolution plans is complicated, which includes complex and cross-border issues that must be implemented and coordinated within a short period of time. Hence, the resolution planning is an on-going process and a long-term mission to remove obstacles against the possibility for resolution action in banks. This planning does not mean drafting an annual plan that is stored somewhere in some shelf and it is dusted off only when its implementation is necessary; instead, it is the beginning of a long process of restructuring all aspects of the banking business that may hinder this process.