ISBN (printed) : 978-605-5758-70-7 ISBN (electronic) : 978-605-5758-69-1
ISBN 978-605-5758-70-7 THE CENTRAL BANK OF THE REPUBLIC OF TURKEY FROM PAST TO PRESENT 2012
www.tcmb.gov.tr [email protected] Complimentary copies of this booklet will be sent upon request whilst stocks last. Please contact: [email protected] Electronic copy available on the web page.
Central Bank of the Republic of Turkey (Türkiye Cumhuriyet Merkez Bankası) Head Office İstiklal Cad. 10 Ulus, 06100 Ankara, Turkey
Phone: (90 312) 507 50 00 Facsimile: (90 312) 507 56 40 World Wide Web Home Page: http://www.tcmb.gov.tr E-mail: [email protected]
ISBN (Printed) : 978-605-5758-70-7 ISBN (electronic) : 978-605-5758-69-1
This booklet is a publication of the Central Bank of the Republic of Turkey and is not for sale. Introduction
entral banks are institutions Accordingly, the organizational Cauthorized to issue currency structure and policies of the Central and implement monetary policy. Bank of the Republic of Turkey have They assume vital importance for the undergone various changes over time sound functioning of the economy. in line with the requirements of the Policies implemented by central economy. This booklet examines the banks and their institutional history of the Central Bank in three structures should be considered periods, particularly focusing on the together with the respective duties and functions it has assumed countries’ political and social after the economic crisis in 2001. developments, and economic The first period glimpses into the policies. In recent years, with Ottoman period and the early years globalization, international markets of the Republic of Turkey. The second and foreign economies have period encompasses the early 1970s started to exert influence on their until 2000, while the third focuses on institutional structures. Hence, the the time span from 2001 until today. duties and powers of central banks have evolved over time.
1 Attempts to Establish a Central Bank in the Ottoman Period and in the Early Years of the Republic
n the Ottoman Empire, treasury Later, the Ottoman Bank dissolved Ioperations, money and credit itself and was renamed “Imperial transactions and trade in gold and Ottoman Bank (Bank-ı Osmanî-I foreign currencies were executed Şahane or Osmanlı Bankası)”. In 1863, in varying degrees by the Treasury, it was restructured to become a state the Mint, jewelers, moneylenders, bank as a British-French partnership. foundations and guilds. Within this The Bank was granted the privilege structure, which continued till the of issuing banknotes for a period of second half of 19th century, the thirty years. Moreover, the Bank would Ottoman Empire minted gold coins. act as the treasurer of the state and collect the state revenues, perform the The Ottoman Empire exercised the payments of the Treasury and discount right of seigniorage for the first time Treasury bills as well as making in 1839. Hand-made cash banknotes the interest and principal payments called “Kaime-i nakdiye-i mutebere”, regarding domestic and foreign debts. served more like interest-bearing However, the foreign capital ownership debt instruments or Treasury bills. of Osmanlı Bankası led to heated During the Crimean War in 1854, the debates over the years. Reactions Empire resorted to foreign borrowing intensified in the period of the Second for the first time in its history. Thus, Constitutional Monarchy when the the need arose for an institution idea of establishing a national central that would act as an intermediary bank was formed. Attempts to establish between the Ottoman Government a domestic capital-based central bank and European countries in foreign debt culminated in the establishment of repayment. For this purpose, in 1856, the “Ottoman National Credit Bank the London-based “Ottoman Bank (Osmanlı İtibar-ı Milli Bankası)” on (Bank- Osmanî)” was founded with 11 March 1917. However, due to the British capital. The powers of the Bank defeat of the Ottoman Empire in the were limited to extending small loans; First World War, the Bank failed to making advance payments to the achieve its purpose of becoming a government and discounting certain national bank that would replace the Treasury bills. Osmanlı Bankası. 2 An Ottoman coin An Ottoman Banknote from the museum of the Imperial Ottoman Bank
Following the end of the First World In this framework, Turkey exchanged War, a tendency to establish central views with central banks of other banks to issue currency and manage countries on establishing the Turkish monetary policies had emerged Central Bank. In 1928, Dr. G. throughout the world. Vissering, Head of the Board at De In the same period, Turkey also Nederlandsche Bank (Central Bank witnessed efforts towards establishing of the Netherlands), was invited to a central bank to reinforce the political Turkey. In his report, Dr. G. Vissering independence achieved by the War underlined the need for establishing an of Independence (1919-1922) with independent central bank. Likewise, the economic independence. The Count Volpi, Italy’s former Minister of issue was first raised at the İzmir Finance, maintained that establishing Economic Congress in 1923, with a a central bank was essential in order special emphasis on the establishment to ensure the stability of the Turkish of “a national state bank” that would currency. function as “the bank of issue”.
3 First Head Office Building First Employees (1932)
Central Bank between 1931 and 1970
he Government of the Republic of and privileged companies; and class TTurkey, having evaluated all the D shares were allocated to Turkish related opinions about establishing commercial institutions and legal and a central bank, started to prepare real persons of Turkish nationality. the necessary legal framework for During the establishment process, a establishing a central bank. To this publicity campaign was carried out to end, a draft bill on the establishment encourage the public, especially civil of a central bank was prepared with servants, to purchase shares of the the contribution of Prof. Leon Morf Bank. from the University of Lausanne. The main body of the Bank was the Finally, the Grand National Assembly General Assembly of Shareholders. of Turkey passed the “Law No. 1715 Other bodies of the Bank were: The on the Central Bank of the Republic of Board of Directors, the Bank‘s highest Turkey” on 11 June 1930. executive body; the Commission The Central Bank started to operate on of Auditors authorized to audit the 3 October 1931. As a manifestation of operations and accounts of the Bank; its independence and a peculiarity that the Discount and Credit Committee, distinguishes the Central Bank from entrusted with regulating discount and other public institutions, the Bank was interest rates besides credit affairs; the established as a joint stock company Administrative Committee to regulate and was structured as a General the appointment of employees as well Directorate. Bank shares were divided as credit and discount procedures; the into class A, B, C and D shares. Class General Directorate and Branches. A shares belong solely to the Treasury. According to Law No. 1715, the Law No. 1715 stipulated that, in order primary objective of the Central to reinforce the Bank’s independence, Bank was to bolster the economic the amount of these shares would not development of the country. The Bank exceed fifteen percent of the capital. was vested with the exclusive privilege Class B shares were allocated to of issuing banknotes in Turkey. national banks operating in Turkey, Moreover, the Bank was also while class C shares were allocated authorized to set rediscount rates to banks other than national banks 4 Selahattin Çam, the First General Director
-the main policy tool-, to regulate the the public finance deficit, rather money market and the circulation of than implementing an independent money, to execute treasury operations, monetary policy. Therefore, the general and to take all necessary measures for price level increased more than three- the sake of safeguarding the value of fold between 1938-1948. the Turkish currency. The Bank also With the 1950s, growth and rapid assumed the role of the treasurer of the development targets were given government. prominence and economic growth was Under the fixed exchange rate regime, financed from Central Bank resources. the Government was the sole authority Accordingly, some amendments were to set exchange rates. made to the Bank Law to render During the 1930s, the government Central Bank’s resources available could not interfere with the Bank‘s to the public sector via short-term purview and decisions, and this period advances provided to the Treasury. was marked by the independence of With the transition to a planned the Central Bank and consequently economy in the 1960s, the Central low inflation. Bank pursued expansionary monetary In the 1940s, which were pronounced policies in line with economic by the adverse effects of the Second circumstances and industrial World War, central bank resources development and continued to finance worldwide began to be used for government budget. In this period, public finance. The Central Bank most practices related to foreign of Turkey was no exception and exchange control were transferred to adopted policies aimed at reducing the Central Bank as well.
5 Governor Naim Talu
Central Bank between 1970 and 2001
fforts towards improving the Central equivalence in foreign representation EBank’s efficiency accelerated in and protocol. Accordingly, Mr. Naim the 1960’s, and a new era began in Talu became the first person assuming the history of the Central Bank with the title of “Governor”. Moreover, the enactment of a new founding a new decision-making body law. With this law, the Central Bank, called the “Executive Committee”, albeit partially, gained a structure consisting of the Governor and that adopted innovations both in the Deputy Governors was established. economic field and the field of central The highest decision making body of banking. the Bank, the eight member Board of “Law No. 1211 on the Central Bank Directors was transformed into the of the Republic of Turkey”, which six-member “Board”. Besides, the was enacted on 14 January 1970, General Assembly of Shareholders was introduced significant changes in renamed as the “General Assembly”; the legal status and organizational the Commission of Auditors as the structure as well as the powers and “Auditing Committee”; the term duties of the Bank. While the legal General Directorate was replaced by status of the Bank was retained as a “Head Office”. joint stock company, it was decided Law No. 1211 enhanced the Bank’s that the Treasury’s shares would not be powers and duties. First, the Bank’s less than fifty-one percent of the Bank’s control over direct and indirect capital. monetary policy instruments has One of the significant changes made been increased. In addition, it was in the organizational structure was stipulated that the Government, while the formation of the chair of the taking measures regarding money and Governor to replace the title “General credits, shall ask the opinion of the Manager” with a view to achieving Bank. With the amendment to the Law, the Bank was authorized to conduct 6 General Assembly of Shareholders (1980) İstanbul Branch open market operations to regulate and credits shall be determined under money supply and liquidity. Moreover, market conditions. Moreover, the the Bank was permitted to conduct Turkish lira was devalued and fixed rediscount operations and extend exchange rate regime was abandoned. medium-term loan for the purpose of Another important development of the supporting investments and economic 1980s was the amendment to the Law development. The amount of advances on the Central Bank of the Republic available to the Treasury was raised of Turkey in 1983 to authorize the to fifteen percent of the budget Bank to manage the national gold and appropriation for the year in question. foreign exchange reserves effectively. The 1980s were marked by Furthermore, an article was added developments that could be defined to the Law stipulating that the Bank as milestones for both the Turkish shall carry out its primary functions economy and the Central Bank. parallel with the key requirements of The decisions of 24 January 1980 the economy as well as to ensure price introduced a structural transformation stability. for the Turkish economy. Price controls In 1987, the Central Bank began to were abandoned in order to allow conduct open market operations. In prices to be determined under the that period, the Bank pioneered to market mechanism and foreign trade establish money and foreign exchange has been liberalized. markets in the modern sense. For With the launch of the financial this purpose, the Money Markets and liberalization process, owing to Fund Management Department was which, important steps were taken established on 22 October 1987. towards establishing an infrastructure In 1989, the Decree No. 32 allowed that would enable the Central Bank economic units to conduct operations to conduct monetary and exchange in foreign currency and, the Turkish rate policies in tune with the free lira was recognized as a convertible market economy. Concurrently, it was currency and a more flexible exchange decided that interest rates for deposits rate regime was thus adopted. 7 Ankara Branch Markets Department
In 1990, for the first time, the Bank use of Central Bank resources by the announced its monetary program to the Treasury was restricted. In 1997, the public. The aim of the program was to Bank and the Treasury signed a protocol meet market’s liquidity need without agreement that terminated the use of prejudice to the stability of exchange short-term advances starting from 1998. rates and interest rates. The inflation Between 1995 and 1999, the Central target was met in 1990. However, due to Bank pursued policies to maintain problems such as the pressure inflicted stability in financial markets through on the financial sector by the Gulf preventing speculative movements in the War in 1991, coupled with political FX markets and reducing fluctuations instability, not tight-enough fiscal in exchange rates. Further deterioration policy and a vulnerable banking sector, in economic conditions in this period a financial crisis erupted in the first as a result of exogenous shocks led to quarter of 1994. As a result of the crisis, the introduction, in 2000, of a new inflation recorded three digit figures in economic program based on exchange 1994. rates. However, market confidence This paved the way for the initial began to wane in late 2000 with the legal arrangements with regards the failure to achieve the structural changes financing of public debt by the Central envisaged in the economic program. Bank resources which was one of the This culminated in the 2001 banking main drivers of high inflation. On 21 crisis in Turkey, as a result of which, the April 1994, with an amendment to the exchange-rate-based stability program related article of the Bank Law, the was terminated.
8 Head Office Central Bank Head Office Embossed Work
Central Bank in and after 2001
n the wake of the 2001 economic granting advances and extending Icrisis, the floating exchange rate credits to the Treasury or to other regime was adopted on 22 February public institutions. Purchasing debt 2001 and a structural transformation instruments in the primary market process started in the economy. The issued by the Treasury and public year 2001 was also a milestone with establishments and institutions was respect to the fight against inflation. also prohibited. Thus, the practice At the onset of the structural of using Central Bank resources in transformation process, significant financing public sector deficits was amendments were made in the Central abandoned. This amendment is Bank Law on 25 April 2001. The most important as it brings an end to the notable of these amendments was monetization of public deficits, one of the inclusion of an article stipulating the primary causes of inflation. that the primary objective of the Bank Central Bank independence brought shall be to achieve and maintain about the concept of “accountability”. price stability. In this context, the The practice of this principle has been Law stipulates that the Bank shall outlined in the Article 42 of the Bank’s determine, at its own discretion, the Law. In this respect, every year in April monetary policy that it will implement and October, the Governor submits a and the monetary policy tools that it report to the Council of Ministers on is going to use. Hence, the Bank has the operations of the Bank and the gained instrument independence. monetary policy pursued. The Bank The Law also states that that the Bank bi-annually provides the Planning shall support growth and employment and Budget Commission of the Grand policies of the Government, provided National Assembly of Turkey with that they are not in conflict with the information regarding its operations. objective of price stability. Furthermore, the Bank has the balance Another important amendment made sheet and the income statements to the Law was the prohibition of audited by independent auditing 9 institutions and publishes audit Moreover, with the amendments reports on its website. In addition, made to the Law in 2001, maintaining the Bank submits information to the financial stability was defined as the Government in writing, and informs supporting objective of the Bank. In the public by disclosing the reasons order to maintain financial stability for the failure –if any- to achieve the Central Bank monitors financial the targets or the possibility of not markets, regulates the volume and achieving them and the measures to circulation of Turkish lira, establishes be taken thereof. payments, security transfer and The Bank pursues an active settlement systems, makes the communication policy as called for necessary arrangements regarding the principle of accountability. The these systems, takes stabilizing aim of this active communication measures for the financial system policy is to ensure that the Bank’s and regulatory measures regarding policies are better understood and money and foreign exchange markets. accepted by the public and thus to In accordance with the principle of enhance the Bank’s credibility. To this transparency, the Bank has shared its end, the Communications Department evaluations about financial stability was established in 2002 and in 2007, and has provided warnings about the Communications Department the vulnerabilities and risks in the and Foreign Relations Department system via Financial Stability Reports were merged as part of the Bank’s biannually since 2005. restructuring process and became A monetary reform was launched in Communications and International order to put further emphasis on the Relations Department. Meanwhile, Bank’s determination to fight against the establishment of the Monetary inflation since 2001; to enhance Policy Committee was a significant the credibility of Turkish lira and to step towards the institutionalization eliminate the problems arising from of monetary policy strategies and large denominations in many spheres 10 decision making mechanisms. of social life, such as statistical and Vaults
accounting records, data processing programs Floating Exchange Rate Regime and payment systems. In the first stage of the In a floating exchange rate regime, currency reform, six zeros were dropped and exchange rates are determined by the YTL (New Turkish Lira) banknotes and YKr supply and demand conditions of foreign (New Kuruş) coins were put into circulation currency in the market. Under this regime, on 1 January 2005. In the second and final exchange rates are not a policy tool. The stage of the currency reform, the prefix Central Bank has no commitment on the level of exchange rates. Nevertheless, the “New” was removed from the name of the Bank closely monitors the foreign exchange currency on 1 January 2009 and Turkish lira market as an integral part of financial banknotes and coins of new dimensions and stability. The Central Bank conducts designs were put into circulation. two types of transactions in the foreign exchange market within the of the inflation- Throughout the restructuring process, targeting framework. Firstly, the Bank it was decided to change the monetary holds foreign exchange buying auctions policy strategy as well. In accordance with in line with a pre-announced program to the primary objective of price stability, buy foreign exchange of pre-set amounts the inflation-targeting regime has been and based on foreign exchange liquidity implemented since 2002. In this respect, developments and reserve-raising strategy, an implicit inflation targeting strategy was without conflicting with the main principles implemented between 2002 and 2005 with and the mechanism of the floating foreign exchange rate regime. Secondly, the an attempt to establish the preconditions for Bank “directly intervenes” in the foreign full-fledged inflation targeting in a manner exchange market in the event of excessive not to hamper the operation of the regime. volatility in exchange rates. Under this Besides, the technical and institutional method of intervention, the Bank, as infrastructure of the Central Bank has been an actor, directly buys or sells foreign reinforced. The Bank’s data set has also been exchange in the market. Interventions expanded; the Research Department has can be made against excessive volatilities in the foreign exchange markets in both been restructured to become the Research directions. Interventions might not always and Monetary Policy Department. Finally, a be symmetrical; they can also be in the formal inflation targeting strategy has been form of announcements or warnings. implemented since 2006. 11 Central Bank Money Museum
According to the basic framework of International Reserve Management the inflation-targeting regime drawn up in view of the peculiarities of the The Central Bank is responsible for the Turkish economy, the Central Bank’s management of the country’s foreign main policy instrument is short-term exchange and gold reserves. The Bank makes interest rates. investments with foreign exchange and gold reserves and conducts term or spot banking The Monetary Policy Committee operations, such as purchasing or selling meets at least once a month to and lending foreign currency, securities, make interest rate decisions. These derivative products and gold in the domestic meetings are held in two stages. The and international markets by considering first stage is a broader meeting, to the principles of protecting the principal, liquidity and yield, respectively. Every which officials and specialists from year, the Bank prepares a “strategic model the Central Bank and officials from the portfolio” and an “investment strategy” Undersecretariat of Treasury attend. In reflecting its investment strategy and risk the second stage, only the Committee policy. The reserve management strategy is members convene. In this stage, final determined according to a number of factors evaluations about the outlook are such as the monetary and exchange rate policy implemented, the foreign exchange made and the interest rate decision is liability structure of the Bank, foreign voted upon. While making interest rate exchange denominated debt payments decisions, the consistency of the future on behalf of the Treasury, the borrowing trend of inflation with the inflation strategy of the Treasury and the domestic and target is taken into account with a international economic conjuncture. mid-term perspective. The monetary The Central Bank is also responsible for the policy decision and its rationale are management of risk factors that may arise made public on the website of the during reserve management operations. In this context, the Bank aims to keep the risks Central Bank in a press release the within acceptable borders by pursuing an same day after the meeting. efficient risk management strategy in order Moreover, in line with the principle to manage market, credit and liquidity risks, of transparency, the summary of the as well as operational risks. 12 Monetary Policy Committee meeting Visit Our Website! outlining the Committee’s evaluations www.tcmb.gov.tr and the policy stance regarding the All publications, announcements inflation outlook is posted on the and statistical data published by the Central Bank’s website. Under the Central Bank as well as speeches and inflation targeting regime, the main presentations made by the Governor, communication tool of the Central Deputy Governors and other officials, Bank is the quarterly Inflation Report. and all kinds of detailed information The Inflation Report encompasses the about the Bank are accessible on its general inflation outlook, the risks website. involved and the Bank’s inflation By subscribing to the Bank’s mailing forecasts. The Inflation Reports are list, you can receive regular E-mail introduced to the public via press updates according to selected conferences. preferences.
“The Central Bank’s The communication policy constitutes independence has been and the core of central bank policies as will continue to be a milestone a requisite of the accountability and in achieving good governance transparency principles and within and sound institutions in the framework of both central bank Turkey. The Central Bank of independence and the inflation-targeting the Republic of Turkey is a regime. In this context, the Bank informs powerful institution with its the public of its policies through various independent, transparent communication tools and endeavors and accountable structure. to contribute to make such policies The Bank endeavors to comprehensible and acceptable by the steer expectations with the public. To this end, the Bank uses the help of its policies aimed website, reports, booklets, conferences at maintaining its only and information meetings. target - price stability - and The Central Bank closely monitors its implications regarding international and national developments improving efficiency in its and continues to implement policies in a institutional structure. dynamic manner with frequent updates. Durmuş Yılmaz (June 2007)
13 Organizational Structure of the Central Bank
s in the past, the Central Bank of the Bank is composed of the Acontinues with its process of shareholders who are registered in change and restructuring as called the share book of the Bank. The for by the needs of modern central Assembly convenes every year under banking and in accordance with the chairmanship of the Governor its strategic plan. The aim of this restructuring is to enhance the Bank’s on a date indicated by the Articles of efficiency and success in achieving its Association of the Bank. Each person objectives. or institution owning ten shares or The Central Bank was established representing this number of shares is as a joint stock company and its entitled to one vote. By 2012, 55.12 top governing body is the General percent of the Bank’s shares belong to Assembly. The General Assembly the Turkish Treasury. 14 General Assembly (1976) General Assembly (2012)
The Governor of the Central Bank worked in their professions for at least is appointed for a term of five years ten years. Deputy Governors may be by a joint decree of the Council re-appointed at the expiration of their of Ministers and is eligible for re- terms of office. appointment at the end of term of The highest decision-making body office. The Governor is required to of the Bank is the Board, which is have completed higher education composed of the Governor and six and to have acquired knowledge members to be elected by the General and experience in the fields of Assembly. The Chairman of the Board finance, economics and banking. is the Governor. The term of office of The Governor, in the capacity of Board members is three years. One- the highest executive officer of the third of Board members are renewed Bank, administers and represents the every year. Members, whose terms of Bank, and ensures enforcement of the office have terminated, are eligible provisions of Central Bank Law No. for reelection. Meetings of the Board 1211 as well as decisions taken by the are held at least once a month at the Board. request of the Governor. The Board Four Deputy Governors are convenes with the participation of at appointed to assist the Governor. least two thirds of its members and They are appointed by a joint decree renders a decision by the majority for a period of five years on the of members present. In the event recommendation of the Governor from of a deadlock, the proposal of the among persons who hold a bachelor’s party supported by the Governor or master’s degree and have adequate is considered adopted. Deputy knowledge and experience either in Governors may also attend Board one of the fields of law, public finance, meetings but do not have the right to economics, business administration, vote. banking, finance, engineering, public The Auditing Committee audits all administration, political science, operations and accounts of the Bank. international relations and statistics With no administrative power, the or in faculties of economics and Committee submits its opinions to administrative sciences, and who have 15 Governor's Office (1940) Monetary Policy Committee Meeting Room (2012)
the Board and also presents a copy The Executive Committee is composed thereof to the Prime Ministry. At of the Deputy Governors under the the end of the year, the Committee chairmanship of the Governor. In submits to the General Assembly cases where the Governor is unable to the report it has compiled on the chair, the Deputy Governor designated operations and accounts of the Bank. by him/her presides over the Executive The shareholders of the Bank elect the Committee. The main duties of the Members of the Auditing Committee. Committee are to compile regulations Committee members serve for a term on the administration, organization of two years. and services of the Bank and to ensure The Monetary Policy Committee coordination in operations of the is chaired by the Governor and is Bank. composed of Deputy Governors, a The Bank is organized into member to be elected by and from Departments. By 2012, the Bank among Board members and a member has 15 departments responsible for to be appointed by a joint decree upon conducting operations within their the recommendation of the Governor. sphere of duties. Countrywide, the The Undersecretary of the Treasury Bank is organized into Branches. or Deputy Undersecretary to be Currently, the Bank has 21 branches designated by him/her may participate in Turkey. Besides local organizational in meetings without having the right units, the Bank has Representative to vote. The Committee has the power Offices in Frankfurt, London, New and duty to determine the principles York, and Tokyo. Representative and strategy of monetary policy in offices monitor the economic and order to achieve price stability and to financial conditions of the countries determine the inflation target with the within their region and represent the Government within the framework of Bank in line with instructions from the the monetary policy strategy. Office of the Governor.
16 Governors
Name In office* Selahattin Çam 1931-1938 A. Kemal Zaim Sunel 1938-1949 Mehmet Sadi Bekter 1949-1950 Osman Nuri Göver 1951-1953 Mustafa Nail Gidel 1953-1960 Memduh Aytür 1960 İbrahim Münir Mostar 1960-1962 Ziyaettin Kayla 1963-1966 M. Naim Talu 1967-1971 Memduh Güpgüpoğlu 1972-1975 Cafer Tayyar Sadıklar 1976-1978 İ. Hakkı Aydınoğlu 1978-1981 Osman Şıklar 1981-1984 Yavuz Canevi 1984-1986 Dr. Rüşdü Saracoğlu 1987-1993 Dr. N. Bülent Gültekin 1993-1994 Ş. Yaman Törüner 1994-1995 Gazi Erçel 1996-2001 N. Süreyya Serdengeçti 2001-2006 Durmuş Yılmaz 2006-2011 Dr. Erdem Başçı 19 April 2011 -
* The missing years represent the office of acting governors. Governors used to be called “General Manager” or “Director General” until 1970.
17 The Strategic Plan for 2011-2015
he Central Bank prepares strategic subject to triennial revisions. As called T plans and executes its functions in for by the principles of transparency line with these plans, in order to explain and accountability, the Central Bank how and under what conditions it announced its Strategic Plan for delivers its services in the public, 2011-2015, in late 2010. The Plan is institutional and global domain, what it a dynamic component of the Bank’s seeks to achieve in the future and to daily operations and a guideline reveal its perspective on monetary for transactions, encompassing all policy and its other functions. activities of the Bank. The plan was
planning was taken with the fact- adaptable. Having taken into account the duties in 2002. In the decade between of the Bank as stipulated by the Central 2002 and 2011, strategic plans were Bank Law, as well as in-house support prepared for three-year terms and revised annually. Whereas, starting themes and elaborates these in three from 2011, strategic plans started to strategic levels, as “public”, “global” and “institutional”.
18 Our Vision To ensure that the Central Bank ranks among the world’s leading central banks, on the back of its independency, strong organizational structure, qualified staff, technologic superiority and the capability to produce effective results.
Our Mission To develop and implement policies which will ensure price stability and contribute to the achievement of financial stability for the sound functioning of all economic sectors -primarily the money, credit and capital markets; to manage foreign exchange and gold reserves; to issue banknotes; to safeguard the trustworthiness of the banknotes in circulation; to develop and run payment systems; to enhance regional and global effectiveness via promoting international relations; and to add value to its staff, stakeholders and society as an accountable and transparent institution acting in line with the principles of governance.
19 Our Principles Independency: While fulfilling its duties defined by the laws, the Bank makes decisions independent of other public and private institutions and takes full responsibility thereof. Transparency and Accountability: The Bank announces its policy implementations and the rationale behind them as per the Bank’s transparency principle. Financial statements of the Bank, strategic decisions of interest to the public, principles and targets related to monetary policy, long-term strategic goals are made public in a timely fashion considering the legal limitations as well. Requests for information from institutions, agencies and individuals are evaluated diligently and information is provided accurately in the shortest possible time. The Bank is accountable to the public for strategic decisions in their interest, primarily those of monetary policy. In this respect, the Bank staff is also responsible to the Bank within their powers. The Bank considers accountability an indispensable part of contemporary economic management and places special emphasis on raising awareness in this regard. Informing the public about the Bank’s policies and fulfilling the prerequisites of accountability raise confidence in the Bank and facilitate the management of expectations. Reliability: The Bank implements its policies according to the schedule and manner that have been announced to the public. This consistent approach adopted by the Bank in its policy implementations is influential in raising the public’s confidence towards the Bank. At the same time, success in terms of the pre- announced strategic targets is another essential factor that boosts confidence. Public Interest: The Bank safeguards public interest while implementing its policies and conducting its services. It takes into account the expectations and needs all segments of the public. While safeguarding public interest, the Bank adopts a long-term perspective and attaches particular importance to the interests of the majority rather than small groups. Effectiveness and Efficiency: The Bank is well aware of the fact that the scope of its duties falls under public services. As a non- profit organization, it aims to produce high quality outcomes by the optimum use of resources. The utmost priority is the extent these outputs serve to the achievement of strategic goals and objectives. The Bank takes the necessary measures by evaluating the effects of its policy practices on economic units.
21 Themes for the Public Domain
1. Price stability 2. Financial stability 3. Payment systems 4. Reserve management 5. Fiscal agent, advisor and treasurer to the government 6. Issue policy 7. On-site supervision of banks and financial institutions 8. Compilation and publication of the statistical data 9. Communication, transparency and accountability
Themes for the Global Domain
1. The role in the network of central banks 2. Effectiveness and determining role in international platforms 3. Effectiveness in the neighborhood and region 4. Roles in the European Union accession process 5. Congruence to international norms 6. Liabilities arising from international agreements
Themes for the Institutional Domain
1. Leadership, governance and strategic planning 2. Quality management system 3. Organizational structure 4. Human resources and training processes 5. Technologic infrastructure and informatics systems 6. Corporate communication and in-house activities 7. Construction, logistics and external support services 8. Public relations, publicity and external activities 9. Internal control system 10. Audit activity 11. Legal structure 12. Production and management of information-documents 13. Institutional continuity and security 14. Accounting and budgeting 15. Branch services
21 Central Bank and Payment Systems
ayment systems cover instruments changes in its software and hardware Pfacilitating the exchange of goods was adopted. and services among economic units, Today, large amounts of funds in the institutional and organizational Turkish currency can be transferred framework, the operational processes swiftly and regularly and transaction and the that central banks have records can be kept systematically and effective payment systems and adopt appropriately through the TIC-RTGS systemic-risk-aversion. Therefore, system. The operational and technical managing payment systems has soundness of the system in the face of become one of the key functions of systemic risks is in the responsibility of central banks. the Central Bank. Developments in informatics In addition to the TIC-RTGS system, technologies in 1990s and the a new transfer system was needed to proliferation of electronic banking enable the on-line purchase and sale services paved the way, also in Turkey, of securities. In this context, in 2000, for the establishment of the electronic the Central Bank adopted another banking infrastructure and the system called Turkish Interbank execution of interbank fund transfers Clearing – Electronic Security Transfer via modern-day communication and Settlement (TIC-ESTS) system, techniques. In this framework, the which would run alongside the TIC- Central Bank set up Turkish Interbank RTGS system. This system enables Clearing - Real Time Gross Settlement the conduct of interbank operations (TIC-RTGS) System in 1992 in order related to government securities to allow swift and regular transfer electronically on record through the of funds in Turkish lira. With the accounts in the TIC-ESTS center. introduction of new functions to the system in 2000, the second-generation TIC-RTGS system with significant
22 Gravure Template
Banknote Printing
n Turkey, the power to print banknotes the historical and cultural heritage of Iis held by the Grand National Turkey. Assembly. The Assembly, in turn, The Central Bank carries out the granted the privilege of banknote distribution of new banknotes and printing and issuance to the Central replacement of worn-out banknotes Bank. As laid down in the Central in circulation with the new ones Bank Law, the Bank has the exclusive through its 21 branches. In non-branch authority to print and issue banknotes. locations, banknote stores are available The first four emission groups of and distribution is provided by the banknotes were printed abroad. After it branches of Ziraat Bankası. had been officially decided to establish a plant in 1955, the plant became Print operative in 1956 and banknotes have been printed in Turkey since the issue of the Series 3 - 100 Turkish lira of the fifth emission group in 1957. Banknotes are designed and printed by the Central Bank’s Banknote Printing Plant Department. Banknote designs are inspired by important places, figures, events and eminent persons in
Counting Control
23 Collecting and Publishing Statistical Data
he Central Bank has the authority Sheet, external debt, foreign trade, Tto collect and disseminate data it balance of payments, public finance, considers relevant for the fulfillment production, and employment and of its duties. In this respect, the Bank wage data as well as TIC-RTGS and collects economic and financial TIC-ESTS data, price indices, and data, produces statistics by compiling the results of surveys conducted by and arranging such data and makes the Central Bank. By 2011, EDDS them publicly available. Accordingly, provided access to 930 annual, the Bank publishes data pertaining 65 semi-annual, 21,311 monthly, to exchange rates, data on markets 1,425 weekly, 14,738 quarterly, 234 and the banking system, balance of business-day, 200 fortnightly and 1907 payments, international reserves and daily time series which add up to a foreign currency liquidity and the total of 40,810 time series. results of various surveys (Survey of Expectations, Banks’ Loans Tendency During CEBIT EURASIA 2002 Survey, Business Tendency Survey and activities and within the context of the Real Sector Confidence Index etc.) on “e-Government Awards for e-Turkey” its website in the form of bulletins, granted by the Turkish Industry & charts and reports. In accordance Business Association (TÜSİAD), the with the principle of transparency, the system received the jury’s special Central Bank also announces a data award for rendering the Central release calendar on its website. Bank the first institution in Turkey to In addition, time-series data produced disseminate data through its website and compiled by the Central Bank and making it a worldwide showcase are shared through the Electronic among other central banks, bearing Data Dissemination System (EDDS) in mind the great significance of first- on its website. EDDS is a dynamic hand and real time dissemination and interactive data dissemination of economic indicators for the system providing public access to a transparency of the Turkish economy. time series. EDDS provides users with The System can be reached through data related to markets, money and the Central Bank’s website, via the banking, the Central Bank Balance “Data” menu.
24 Central Bank and Academic Studies
hile shaping the monetary articles published in international peer Wpolicy, the Central Bank is reviewed journals can be submitted. involved in academic activities and Last but not least, the Bank has a large closely follows developments and library holding a vast collection of innovations in the academic world. books, printed and digital periodicals, In this respect, the Bank organizes electronic and CD-ROM databases seminars and conferences at national and working papers along with reports and international level and invites by central banks, all specifically prominent speakers and participants in related to banking and economics. the field of economics from Turkey and The Library is open to Bank staff, other countries. Master’s and Besides organizing academic activities, PhD students in the Bank aims to further expand its social sciences, support to the academic world by academic staff providing financial support for events as well as organized at national and international specialists and level. In this respect, the Bank provides researchers financial support for academic and/ working at other or policy-making conferences in institutions. economics and finance, organized The library is by national and international accessible to universities and institutions, as well other users as for other similar studies through within the its “Financial Support Program for context of Academic Studies”. Furthermore, the cooperation Central Bank also organizes a contest among libraries. to support academic studies, where PhD dissertations on the Turkish economy or monetary policy and
25 İbrahim Safi,Neighbour’s Garden, 1964 Jale N. Erzen, Farewell, 1976 Central Bank and Arts
ince its foundation, the Central SBank has not only supported cultural and artistic events as well as the development of fine arts, but has also been actively involved in these areas. Within this framework, in the 1930’s, the Bank began to purchase paintings on the back of the Government’s culture and arts policy. Currently, the Central Bank
holds a rich and valuable collection İbrahim Çallı, Under the Plane Tree of more than 800 pieces reflecting 1950 period were included in the the development and history of the collection. With close cooperation Republic. with various institutions and The first works of art purchased organizations, the Central Bank by the Bank belonged to the early displays its collection via exhibitions Republican era and the pre-1950’s held in Turkey and abroad, as well as period. The collection was enriched in published catalogues. Some samples with the efforts of the Art Committee of the Central Bank Art Collection established in 1991. In the 1990’s, feature on the Bank’s website. abstract works of art from the post- Last but not least, the Central Bank has also had various music CDs produced in an effort to raise interest and consciousness in art and to contribute to the promotion of Turkish arts and artists at national and international level.
Selahattin Teoman, Bosphorus from Nakkaştepe, 1954
26 Glossary
Central Bank Independence: Central institutionalized so as to achieve bank independence is the capability and maintain price stability. Under of a central bank to act at its own this regime, central banks commit discretion while making decisions themselves to achieving a pre-set and regarding monetary policy and the pre-announced inflation target by instruments to be employed to achieve the end of a given period and they the main objective of price stability. independently use monetary policy Thus, independence of a central instruments exclusively to attain the pre- bank denotes the liberty of a central set target. bank to act free from politics and Issue: It is the first delivery of other pressure groups while making instruments of valuation, such as and implementing monetary policy banknotes, coins, bonds, securities and decisions. Independence is a crucial equities. factor in achieving the price stability objective. Price stability requires Open Market Operations: Open Market long-term, steady and decisive policy Operations (OMO) are money market implementations. Therefore, central operations conducted by central banks banks are organized independently from by selling and buying securities in the political authorities that are more order to ensure that short-term interest inclined to pursue policies towards rates materialize at specified levels and short-term targets. This independent to effectively regulate the liquidity in structure allows the central banks to financial markets within the framework refrain from adopting policies that might of monetary policy implementation. disrupt price stability for the sake of The Bank uses repurchase agreements short-term and temporary objectives and (repos) and reverse repurchase to provide the necessary warnings. agreements (reverse repos) and can also issue liquidity certificates in cases Convertibility: Convertibility is the of a temporary liquidity shortage or ability to freely exchange a country’s surplus in the market. From the Central currency into another country’s currency Bank’s perspective, a repo transaction on foreign exchange markets and to is the sale of securities to be purchased use a country’s currency as a medium back at a later date with the aim of of exchange in international business temporarily injecting money into transactions. the market. Whereas, a reverse repo Inflation Targeting Regime: Inflation transaction refers to the purchase of targeting refers to a monetary policy securities to be sold back at a later date regime, where monetary policy is with the aim of temporarily mopping
27 up liquidity from the market. In addition price stability to a large extent diminishes to these transactions, the Central Bank can uncertainties caused by high inflation. In directly buy or sell government securities such an environment, economic agents in cases of a permanent liquidity shortage would be able to detect relative price or surplus in the market, respectively. changes more easily and they would have OMO covers interbank money market access to more information while making operations as well. In this market, which consumption and saving decisions. In has an important role the Central Bank other words, price stability is a prerequisite conducts operations within the pre- for sustainable growth, economic stability announced interest rate margin to ensure and social welfare. that market interest rates hover within this Rediscount: The term rediscount means band. Besides, the Central Bank performs as the lender of the last resort in this the duplication of a discount. It refers to market when necessary. Turkish lira (time the act of a commercial bank discounting deposit) buying or selling auctions may a debt instrument at the central bank for be held when deemed necessary, with the a second time to generate liquidity. The aim of increasing the effectiveness and interest rate applied to these transactions flexibility of monetary policy. by the Central Bank is called the rediscount rate. Price Stability: Price stability refers to an inflation level so low that economic Seigniorage: It is the difference between agents can ignore it when making their the cost of printing money and the face consumption or investment decisions. value of that money. The issuer can make a Price stability embraces not only positive profit from this difference and can achieving a low level of inflation, but finance a part of its spending without any also maintaining it. An environment of need to borrow and/or collect taxes.
28 Take a Closer Look
Selected Categories from the Central Bank Website Remarks Publications Monetary Policy Financial Stability Price Stability Basic Policy Readings
SELECTED PUBLICATIONS Monthly Price Developments Independent Audit Reports Inflation Report Financial Stability Report Balance of Payments Report CBRT Bulletin Annual Report Central Bank Review Economic Notes Working Papers
SELECTED STATISTICS Balance of Payments Statistics International Reserves/Foreign Currency Liquidity Short Term Debt Statistics Non-residents’ Holdings of Securities Outstanding Loans Received from Abroad by Private Sector International Investment Position Weekly Press Bulletin Monetary and Financial Statistics Bank for International Settlements (BIS) - Consolidated and Locational Banking Statistics Company Accounts Foreign Exchange Assets and Liabilities of Non-Financial Companies House Price Index Capacity Utilization Rate of Manufacturing Industry Business Tendency Survey and Real Sector Confidence Index Bank for International Settlements (BIS) - Triennial Central Bank Survey of Foreign Banks’ Loans Tendency Survey Survey of Expectations Consumer Tendency Survey and Consumer Confidence Index Investment Survey Real Effective Exchange Rate 29
ISBN (printed) : 978-605-5758-70-7 ISBN (electronic) : 978-605-5758-69-1
ISBN 978-605-5758-70-7