ISTANBUL (Reuters) – Turkey is not yet ready to introduce Basel II global bank safety rules due to the size of its public debt stock and its borrowing requirements, the head of its banking association said yesterday. Last month central bank governors and regulatory heads from the G10 industrial nations approved the Basel II capital accord, which governs how much money banks set aside as a buffer against risks. «Before Basel II (is introduced) there must be a further improvement in public finances,» said Ersin Ozince, who is also general manager of leading bank Is Bankasi. «Trying to introduce Basel II standards will not bring productive and desired results in current conditions in Turkey,» he told Reuters in an interview. Turkey has a heavy debt load which it is trying to reduce under a $19 billion loan accord with the International Monetary Fund. The domestic debt stock stood at around $140 billion at the end of May and the foreign debt stock was $146.5 billion at the end of the first quarter. Local banks are big buyers of Turkish treasury debt, which has a non-investment grade rating. Under Basel II they would have to set aside more risk capital than banks that buy more debt from governments with investment grade ratings, such as in the leading industrial economies. Ozince said the Turkish economy was still being affected by credibility problems despite positive signals in boosting growth and cutting inflation to single digits. «I wouldn’t say that we are experiencing a credibility crisis. Our credibility is increasing rapidly but real interest rates are still high,» he said. «The high domestic debt must be restrained and to do that state income must be increased.» The Basel II accords, which central bank governors say will promote world economic growth, must still win legislative approval in the nations that will adopt them. Regulators must persuade politicians that the model code will make the financial system more robust without imposing burdensome costs on the banking industry. The rewrite follows more than five years of discussions, representing the most important regulatory change to the financial sector since the original Basel Accord in 1988. The new rules will be phased in between the end of 2006 and end of 2007.