Turukindlust

Turukindlust is a policy concept describing a mechanism to preserve market functioning by providing contingent financial support to markets during periods of stress. The term combines turu, meaning market, and kindlust, meaning insurance, and is used in economic discussions to denote a facility or set of tools intended to stabilize price discovery and liquidity rather than insure individual assets.

Mechanism: A turukindlust facility may be funded by market participants, government budgets, or both. It can take forms such as price guarantees (floors or collars on prices), liquidity backstops (emergency lending or guarantees to exchanges, banks, or brokers), or default guarantees for counterparty risk. Triggers are defined by volatility, liquidity metrics, or breaches of collateral requirements, with safeguards designed to limit moral hazard and unintended exposures.

Scope and design: The concept can be targeted to specific sectors (for example agriculture or energy), asset classes (equities, bonds, commodities), or time horizons (short-term shocks versus longer cycles). Effective implementation typically requires clear governance, risk assessment, transparent reporting, and independent oversight to prevent misuse and ensure proportionality.

Advantages and criticisms: Proponents argue turukindlust can dampen volatility, protect incomes, and sustain investment during crises. Critics warn of moral hazard, fiscal costs, market distortions, and potential crowding out of private risk transfer. The idea remains a topic of policy debate and is not universally adopted.

See also: market stabilization, liquidity facility, price floor, central counterparty.