The concept of risk is relatively new and has emerged over the past two decades. Today, the risk of credit operations undertaken by banks and other financial institutes and market risk are considered to be a result of fluctuations in the price of assets. Perhaps the collapse of the Breton Woods system and the transformation of the global monetary system from constant parities to floating ones in 1974 can be considered a turning point with regard to the introduction of risk to foreign trade relations of countries. Before that date, governments played a very effective role in maintaining financial stability and preventing financial tensions resulting from changing parities. Their support for foreign exchange and foreign payment systems of their respective countries were considered as a very important stabilizing factor.

With a floating foreign exchange system taking charge of managing creditable and universal currencies, and with the rapid expansion of international trade and finance, the global monetary system has emerged as the origin of big risk regarding foreign financial exchanges of countries. Constant changes in parity rates of major currencies will not only expose foreign assets and reserves of countries to risks stemming from fluctuating rates, but will also increase or decrease global purchasing power for certain goods and services that are exported by countries that lack strong currencies.

Increased risk of foreign financial and credit operations, has played a great role in creating economic crises at state and regional levels since the beginning of the 1980s. Since many countries showed to be ignoring the new destabilizing factor, which had emerged since the beginning of the 1980s in the form of various financial crises in different countries, experts thought about special financial and supervisory arrangements through which similar crises could be prevented. The aim was to bolster financial and capital fundaments of financial institutes in various countries. A large part of the Basle regulations that govern the banking system, the supervisory rules governing financial institutions of the capital market, the supervisory rules dominating insurance firms and social security funds as well as the supervisory rules that regulate payment system in addition to the system of debt payment that emerged in the 1980s and the 1990s were meant to bolster financial fundaments of state institutes. The main reason behind the compilation of the said rules and regulations was to prevent the evolution of small domestic financial crises into regional ones.

Although risk and methods taken to oppose it are important within a comprehensive framework of risk management for all institutions and organizations, experiences gained in the past two decades indicate that risk management regulations are vital to five groups of institutes. Those five groups include banks and other financial institutes of money market, financial institutes of the capital market and stock exchange, insurance firms, pension and social security funds, and finally, the system used for simultaneous settlement and payment of debts.

For this reason, global financial organizations like the International Monetary Fund, the World Bank, Bank of International Settlements and other institutions have taken steps to formulate supervisory regulations over the past decade. Those regulations are the product of the best state experiences at a global level that have been put at the disposal of developing countries as well as emerging economies in order to encourage global utilization of those experiences and prevent further trial and error.

With regard to activities of banks and other financial institutes of money market, two sets of regulations concerning risk management have been formulated by the Basle Committee. Referred to as Basle 1 and Basle 2, they are to be used by those active in the market as well as by supervisory banking authorities of various countries. Basle 1 regulations were compiled in 1988 and pertain to capital efficiency and classification of banks’ assets from the viewpoint of credit risk. Basle 1 regulations were implemented by major international banks since the beginning of 1990s. Shortly after the implementation of the said regulations and in late 1990s, it was made clear that those regulations suffered from many weaknesses with regard to international banking. For this reason, new regulations called Basle 2 were complied in the early years of the current decade and were proposed to banks and bank supervisory authorities.

The new regulations not only covered credit risk, but also market and operational risks. In addition, new Basle regulations have paid special attention to the issue of supervision and the fact that banks should enjoy suitable risk management systems and mechanisms for internal supervision. New Basle regulations have put the main emphasis on market transparency and discipline and contain serious recommendations with regard to assuming responsibility, transparency, dissemination of information, quality of information and similar matters.