A Glance at 2020

FOCUSING ON PRICE STABILITY

In line with its objectives of achieving price stability, the CBRT made use of monetary policy and liquidity tools appropriately in view of market conditions and requirements.

The CBRT’s rate cut process, which started in July 2019, continued in January and February 2020 with a total reduction of 125 basis points and another total of 200 basis points in March and April.
To contain negative effects of the coronavirus pandemic on the Turkish economy, the CBRT took measures to maintain the healthy functioning of financial markets, the credit channel and firms’ cash flows.
The CBRT employed RRs in 2020 both as a supporter of the monetary policy and a macroprudential tool. In early March, to channel loans extended by the banking sector towards productive and production-oriented sectors rather than consumption, to affect the current account balance positively and support financial stability, the weight of consumer loans was lowered in the calculation of loan growth and loans extended to selected sectors were taken into account rather than commercial loans in the credit growth-linked RR practice.
In order to contribute to the banks’ liquidity management and include gold savings in the system, Turkish lira gold swap market and foreign currency gold swap market operations at the CBRT continued in 2020. Additionally, with the press release of 17 March 2020, to enhance banks’ Turkish lira and foreign exchange liquidity management, Turkish lira gold swap auctions were launched.
In May, the CBRT underlined the rise in unit costs resulting from declining production and sales, and assessing that the disinflationary effects of aggregate demand conditions had increased, made a measured rate cut of 50 basis points.
In June, emphasizing that despite the restraining effects of aggregate demand conditions, the pandemic-related rise in unit costs led to some increase in the trends of core inflation indicators, the CBRT kept the policy rate unchanged.
In July, although maintaining the view that demand-driven disinflationary effects would become more prevalent in the second half of the year, the CBRT kept the policy rate unchanged as risks to the end-year projection were on the upside.
As of August, coordinated steps towards monetary tightening were initiated and facilities, which were launched in March to contain the possible adverse impacts of the pandemic-driven global uncertainties on the Turkish economy, were phased down.
In September, the CBRT decided to increase the policy rate by 200 basis points to restore the disinflation process and support price stability.
The CBRT kept the policy rate unchanged in October, yet decided to maintain the tight stance in monetary and liquidity policies until the inflation outlook displays a significant improvement. The monetary policy operational framework was changed and the spread between the CBRT lending rate applied to Late Liquidity Window (LON) transactions and the overnight lending rate was set as 300 basis points.
Until November, within the framework of OMO, the CBRT provided funding through one-week quantity repo auctions, PD liquidity facility, quantity repo auctions conducted within the framework of targeted additional liquidity facilities, one-month repo auctions held via the traditional method, overnight repo and deposit transactions and LON operations.
In November, with a view to eliminating risks to the inflation outlook, containing inflation expectations and restoring the disinflation process as soon as possible, the policy rate was increased from 10.25% to 15%. In addition to monetary tightening, the CBRT decided to provide all funding at the one-week repo auction rate, which is the main policy rate within a simple operational framework.
At the end of November, the CBRT decided to simplify the reserve requirement regulation to enhance the effectiveness of the monetary transmission mechanism in line with the main objective of price stability. Accordingly, it was decided to repeal the reserve requirement practice that links the RR ratios and remuneration rates to real loan growth rates, to apply the same reserve requirement ratios and remuneration rates to all banks and to apply remuneration rate of 12% to the TL-denominated RRs of all banks.
In December, taking the end-2021 forecast target into account, to restore the disinflation process as soon as possible, the policy rate was increased from 15% to 17%.

PLAIN, EFFECTIVE AND BILATERAL COMMUNICATION

The CBRT pursued a plain, effective and bilateral communication policy in 2020.

The year 2020 was marked by the impacts of the coronavirus pandemic, and the measures taken by the CBRT to curb the possible effects of the pandemic on the Turkish economy were shared with the public by press releases.
The CBRT adopted a simple operational framework in monetary policy as of November. This decision on the monetary policy was supported with a strong communication policy emphasizing the priority of price stability in the CBRT’s policy stance.
The coronavirus pandemic, which occupied the global agenda in 2020, necessitated certain communication activities being held virtually. One of the Press Briefings to introduce Inflation Reports was made online, while the other three were held in a physical venue under strict coronavirus precautions. In addition, the Monetary and Exchange Rate Policy for 2021 was announced to the public on 16 December 2020 through an online press meeting.
In the January-March period of 2020, the CBRT organized technical face-to-face meetings and teleconferences with investor agencies and Credit Rating Agencies (CRAs). In July and September, two video teleconferences were held with domestic and international investors, economists, analysts and portfolio managers.
With a view to obtaining information on economic activities and the decision-making mechanisms of firms and monitoring the perceptions of the corporate sector of the economy in a timely manner, meetings were held with a total of 1,775 firms, 878 of which were from the manufacturing industry in addition to 19 non-governmental organizations.
As a part of the policy of communication with stakeholders, the CBRT Governor conducted a series of presentations, speeches and interviews in Turkey concerning the CBRT’s policies and practices and current economic developments in 2020.
Governor Naci Ağbal made a presentation at the GNAT Plan and Budget Committee on 25 December 2020.
New analyses were posted on the corporate “CBRT Blog” that enables the CBRT staff to share their views with the public, open these views for debate and offer timely contributions to the economic agenda.
The “Economics for All” initiative, which was introduced to raise awareness about the importance of price stability and provide different shareholders with economics training, remained active. To make these training content nationwide, the CBRT continued with its “Economics for All in Anatolia” project. Accordingly, events were held on 25-27 February 2020 in Trabzon and on 11-12 March 2020 in Sivas.

MORE INTENSIVE AND EFFICIENT USE OF TECHNOLOGY AND FINANCIAL INFRASTRUCTURE

The CBRT continued to use technology and automation intensively and efficiently in all business processes and take steps to foster financial infrastructure.

Social media platforms, the website, microsites and the CBRT blog were used intensively as digital communication channels.
In the field of Information Technologies (IT), studies were carried out to establish technological solutions and systems in accordance with the vision and needs of the CBRT and to make these systems secure and sustainable.
An instant response was given in the pandemic period to ensure the continuity of the CBRT’s work. To this end, access to video conferences and online meetings was enhanced; the amount of hardware to support mobile working was increased; and additional measures were taken to ensure security in remote access.
In line with the measures taken against the coronavirus pandemic, most of the significant meetings were made virtually via video conferences. IMF/WB meetings, meetings with central banks, conversations with investors, meetings of the Board and the Executive Committee were carried out with state-of-the-art technological facilities without any interruptions.
The CBRT completed studies to launch a new payment system to be available 24/7 and facilitate the transfer of payments between accounts within seconds as well as the instant notification of the parties of the transaction. With this new system, named FAST (Instant and Continuous Transfer of Funds), money transfers will be allowed between accounts at different banks within seconds on a 24/7 basis. The FAST System was operational on 18 December 2020 as a pilot run.
The “Regulation on the Generation and Use of TR QR Code in Payment Services” was put into force following its publication in the Official Gazette No. 31220 dated 21 August 2020. Studies were carried out to establish the infrastructure that allow the payment service providers handling transactions with QR Code to adopt TR QR Code and those enterprises that accept payments of the CBRT’s payment systems or cards to accept payments via the TR QR Code. The deadline for the establishment of infrastructure towards the enforcement of these initiatives was set as 31 December 2021.
With the CBRT’s proposal and the Presidential Decree, the Payment and Electronic Money Institutions Association of Turkey (Association) Status was put into force following the decree’s in the Official Gazette No. 31169 dated 28 June 2020, which led to the foundation of a professional organization as a legal entity with the status of a public institution. Applications for membership of payment and electronic money institutions that are already operating in Turkey to the Association were received, and the first General Assembly Meeting was held by the CBRT and bodies of the Association were founded.
The CBRT determined important areas of improvement regarding the payment infrastructures and innovative business methods in our country. Accordingly, the BKM (Interbank Card Center) is planned to assume significant tasks in addition to its roles focusing mainly on card payments. In this context, pursuant to Paragraph 4 of Article 8 of the Law No. 6493, the CBRT became the controlling shareholder of the ICC, which is the system operator with systemic importance.
Financial Innovation Department was established to adopt best practices and bring the respective technological infrastructures to the CBRT by following global developments in finance, to undertake analyses regarding digital currency, to make necessary technological preparations required for realizing a digital currency and to carry out studies in artificial intelligence and machine learning.
An R&D Project was initiated about central bank digital currency. The aim of this project is to examine the issuability of a digital currency by the CBRT as a concept under different scenarios, testing and conducting research and development activities. The outputs from the R&D Project will enable the determination of various features that the digital currency may have, the analysis of the effects to arise by combining these features together, the determination of technological requirements and the understanding the extent that available technologies meet these requirements. Moreover, research was also conducted on artificial intelligence and machine learning techniques.

COORDINATION WITH NATIONAL AND INTERNATIONAL SHAREHOLDERS

In the development and implementation of economic policies under its domain, the CBRT continued to work in coordination with national and international stakeholders.

With a view to enhancing cooperation with central banks and international organizations, various meetings, conferences, seminars and workshops were attended on domestic and international platforms. Activities were held face-to-face from January to February, and online from March to December 2020 focusing on the global economic and financial outlook, steps taken to mitigate the impacts of the COVID-19 pandemic and possible challenges and opportunities in the post-pandemic period.
To lay the ground for improved bilateral cooperation in central banking issues, a memorandum of understanding was signed with the Central Banks of Azerbaijan and Libya. With these new memorandums of understanding, the number of central banks with which the CBRT officially cooperates reached 34. Thus, the scope of the CBRT’s international cooperation network was widened.
Subsequent to the efforts made in recent years in international cooperation, the CBRT performed technical cooperation activities that were planned with other central banks via video conferences in 2020.
Under the CBRT’s bilateral cooperation strategy, 17 video conferences were made with 10 peer central banks, and 58 activities were undertaken in total with 34 peer central banks including information requests and high-level meetings.
The CBRT attended Spring Meetings and Annual Meetings held as video conferences by the International Monetary Fund (IMF) and the World Bank (WB).
Coordination was established with domestic and international shareholders via the meetings held periodically by the IMF, G-20 and International Bank of Settlements (BIS).
In 2020, activities of the G20 platform were chaired by Saudi Arabia. The CBRT attended ordinary meetings in addition to the extraordinary G20 Presidents and Ministers meetings, which addressed the challenges driven by the global economy and the international financial system in the pandemic period.
“The Central Banks’ Governors Club of the Central Asia, Black Sea Region and Balkan Countries” and “OIC-COMCEC Central Banks Forum” meetings were held.
The CBRT continued to provide the Turkish Ministry of Foreign Affairs, Directorate for EU Affairs with information concerning the developments in the chapters for which it is responsible so that the Ministry can monitor the progress in Turkey’s harmonization with the EU Acquis and forward this information to the European Commission. Moreover, studies regarding the Economic and Financial Dialogue between the EU and Western Balkan countries and Turkey continued virtually in 2020 due to the COVID-19 pandemic, and the preliminary studies made to revise the EU National Action Plan to cover the 2020-2023 period, and the CBRT made contributions concerning the chapters falling in its domain.

CULTURAL, ARTISTIC AND SOCIAL SENSITIVITY

Acting with social responsibility and sensitivity, the CBRT continued to engage in cultural, artistic and sports activities.

The Bank aims to promote its art collection and ensure that Turkey’s cultural heritage is passed on to future generations through exhibitions across Turkey. Accordingly, an exhibition was held in Sivas between 11 March and 30 June 2020 to honor the 100th year of the National Struggle.
Concerts of the Turkish Folk Music and Classical Music Choirs were held and an online chess tournament was organized.
The CBRT participated in social responsibility activities, and continued to contribute to academic studies through donations and aid.
The CBRT donated TRY 100,000,000 to the National Solidarity Campaign “We are self-sufficient, Turkey” launched to support those segments of the society to be hit hardest by the measures to be taken against the global coronavirus pandemic and to foster social solidarity.
Founded by the contributions of the CBRT and the Bank of Greece after the 1999 earthquake, the Central Bank Derince Anatolian High School opened its doors to students in the 2001-2002 academic year. The CBRT continued to award scholarships to graduates of this high school who have enrolled in a university and who satisfy specific criteria in 2020. In the 2020-2021 school year, the number of scholarship recipients increased by 8 to 37 and reached a cumulative total of 120.