A Glance at 2021
FOCUS ON SUSTAINABLE PRICE STABILITY AND CONTRIBUTION TO FINANCIAL STABILITY
In line with its objectives of achieving price stability and supporting financial stability, the CBRT continued to use monetary policy and liquidity tools appropriately in view of market conditions and requirements.
- The CBRT gave messages on the predictability of its monetary policy stance.
- In March the policy rate was increased to 19% from 17%. In the second quarter of 2021, the CBRT communicated that the monetary stance would continue to be determined at a degree of tightness that would restore the disinflation process as soon as possible and ensure the attainment of the medium-term targets. Accordingly, it kept the policy rate constant in the April-August period, and having evaluated the analyses to decompose the impact of demand factors on which monetary policy can affect, core inflation developments and supply shocks, and reduced the policy rate by a total of 500 basis points in the September-December period. Thus, in December, the CBRT decided to complete the use of the room implied by transitory effects of supply-side factors and other factors beyond monetary policy’s control on price increases.
- As an essential factor of the “Liraization Strategy”, in order to increase the share of Turkish lira in the total deposits/participation funds in the banking system, the CBRT announced on 21 December 2021 that it would provide support to deposit and participation fund holders in the event that their existing FX deposit accounts and FX participation funds as of 20 December 2021 were converted into Turkish lira time deposit and participation accounts. On 29 December 2021, the CBRT announced that it would provide incentive to deposit and participation and participation fund holders in the event that their gold deposits and participation funds were converted into Turkish lira time deposit and participation accounts at the account holder’s request. Under this practice, the CBRT decided to exempt the converted sums from the reserve requirement (RR) obligation.
- Reserve requirements have been used as an instrument to support the monetary transmission mechanism in line with the objectives of achieving price stability and supporting financial stability. In 2021, the CBRT aimed to support financial stability by increasing the share of Turkish lira in both RRs to be held for TRY-denominated liabilities and in the total deposits/participation funds in the banking system.
- To this end, the facility of maintaining TRY RRs in terms of FX within the scope of the Reserve Options Mechanism (ROM) was phased out, the upper limit of the facility for holding standard gold for TRY RRs was reduced to 10% and it was announced that this facility would be terminated gradually. Changes in FX RR ratios were made concurrently with the ROM regulation changes.
- The CBRT introduced comprehensive changes to rediscount credits on 1 October 2021 to reduce the adverse effects of these credits on reverse currency substitution process and exchange rates, make these credits available primarily to small and medium-sized enterprises (SMEs), decrease borrowing costs, and allow extension of credits also in terms of TRY.
- In 2021, the CBRT provided funding within a simple operational framework through Open Market Operations (OMO) and currency swaps. The funding was provided at the one-week repo rate (the policy rate) via quantity auctions under the OMO. In 2021, in the framework of swap transactions against FX, the CBRT provided funding through Turkish lira currency swap auctions conducted via the traditional method, Borsa Istanbul (BIST) Swap Market transactions and Turkish lira currency swap transactions.
- Due to unhealthy price formations in exchange rates, the CBRT directly intervened in the market via selling transactions on 1, 3, 10, 13 and 17 December 2021, thereby injecting a total of USD 7,278 million in liquidity to the market.
PLAIN, EFFECTIVE AND BILATERAL COMMUNICATION
The CBRT aimed to conduct plain, transparent and bilateral communications to increase the effectiveness of the monetary policy in line with its sustainable price stability objective.
- In 2021, in addition to the decisions of the Monetary Policy Committee, Inflation Reports and Financial Stability Reports, the CBRT’s market operations, economic measures taken, and the statistics compiled were publicly announced through press releases and other communication channels as well as through social media posts.
- Due to the persisting coronavirus pandemic in 2021, two of the Inflation Report Briefings were made in virtual format, while the other two were held physically under coronavirus precautions.
- Governor Prof. Şahap Kavcıoğlu delivered a presentation at the Grand National Assembly of Türkiye (GNAT) Plan and Budget Committee.
- As a part of the policy of communication with stakeholders, Governor Prof. Şahap Kavcıoğlu gave interviews to written and visual media concerning the CBRT’s policies and practices and current economic developments in 2021.
- The CBRT staff continued to share their analyses with the public through their posts on the CBRT blog.
- Meetings were held with national and international investors, economists, analysts and portfolio managers.
- As part of its Social Media Strategy, the CBRT continued to actively use the social media by enriching its visual content.
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 to take steps to foster financial infrastructure.
- Within the scope of the Central Bank Digital Turkish Lira Research and Development (R&D) Project, the CBRT signed bilateral memorandums of understanding with ASELSAN, HAVELSAN and TÜBİTAK-BİLGEM, and established the “Digital Turkish Lira Collaboration Platform”. The process that started with the completion of the proof of concept of the project moved on to the next stage with the participation of technology stakeholders. In the light of the findings of the first phase, which involves preliminary testing of strategic and critical technologies related to the project, the plan is to expand the platform with the involvement of new participants.
- The CBRT initiated a project related to notifications and inquiries regarding banknote lodgement and withdrawal transactions that it conducts with banks. The project involved processing of such notifications and inquiries through a web service other than CBRT Payment Systems. At the first stage of the project, web services for payment transactions were developed and put into practice. The project is intended to ensure a more efficient flow of information by switching to a more effective and flexible communication infrastructure in cash transactions, and to increase efficiency in cash management.
- To contribute to public health, sterilization modules using ultraviolet radiation (UV-C) technology were developed to make the banknotes processed at CBRT branches free of harmful microorganisms, and the integration of these modules into the Bank’s banknote processing systems continued.
- Due to the coronavirus pandemic, the International Monetary Fund/World Bank (IMF/WB) meetings, meetings with other central banks and investor, and Inflation Report Briefings were held by videoconference in virtual format. With the use of the most advanced technological means for such meetings, they were held without any interruption to their workflow.
- In the field of information technologies, the CBRT continued its efforts to create the technological solutions and systems needed in line with its vision as well as to ensure the security and continuity of these systems.
- The CBRT started to transform its technology and application architecture to respond to its needs more quickly, to keep continuity high by increasing technical platform alternatives, and to monitor the services offered end-to-end.
- To support data-driven decision-making processes, the CBRT continued to make improvements in the areas of business intelligence, data management, infrastructure and cyber security.
- The CBRT carried out the infrastructure work for enhancement of cyber security resilience. New ways of secure remote working and communication were made available.
- The CBRT continued to take steps to foster financial infrastructure in order to establish payment and securities transfer and settlement systems, to ensure the uninterrupted operation and supervision of the existing and future systems, to make necessary arrangements, and to determine the methods and instruments to be used, including the electronic environment for payments.
- The Regulation on the Disuse of Crypto Assets in Payments was published in the Official Gazette No. 1456 of 16 April 2021 and entered into force on 30 April 2021. The Regulation defined crypto assets as used in this scope and set the rules and procedures that would govern payments and crypto assets.
- In accordance with Paragraph 1, Article 9 of the TR QR Code Regulation, the notification method to be used by businesses to inform clients that their QR code payments are accepted was determined and announced on the CBRT’s website on 25 February 2021.
- The Regulation on Payment Services and Electronic Money Issuance and Payment Service Providers and the Communiqué on Information Systems of Payment and Electronic Money Institutions and Data Sharing Services in Payment Services of Payment Service Providers entered into force upon its publication in the Official Gazette No. 31676 of 1 December 2021. These arrangements set out the operating principles of payment and electronic money institutions, the issues related to the information systems they use in their operations, as well as the procedures and principles regarding data sharing services in the field of payment services.
- The CBRT approved the operating license applications of two companies.
COORDINATION WITH NATIONAL AND INTERNATIONAL STAKEHOLDERS
The CBRT continued to work in coordination and strengthen its relations with national and international stakeholders in matters that fall under its remit. The Bank sustained an active interaction with its stakeholders, organizing meetings, participating in events and engaging in bilateral cooperation.
- The CBRT hosted the third meeting of the “OIC-COMCEC Central Banks Forum” under the Organization of Islamic Cooperation (OIC), of which it acts as the secretariat. The event took place in virtual format on 29 September 2021.
- On 1 July 2021, the CBRT took over the co-chairmanship of the Financial Stability Board Regional Consultative Group for Middle East and North Africa (FSB RCG MENA), of which it is a member. The Bank will carry out this task with the Central Bank of Tunisia for a period of two years. The first meeting of the Group for 2021 was held online on 3 December 2021.
- The 45th meeting of the Central Bank Governors’ Club of Central Asia, Black Sea Region and Balkan Countries (Governors’ Club), whose secretarial work is undertaken by the CBRT, was held online on 8 December 2021, hosted by the Bank of Russia.
- The CBRT continued to take part in works related to international meetings organized by the G20, the International Monetary Fund (IMF) and the Bank for International Settlements (BIS). The CBRT coordinated with domestic and international stakeholders, and duly participated in such meetings.
- The IMF-WB joint Financial Sector Assessment Program (FSAP) was initiated for Türkiye in 2021. In this process, carried out under the coordination of the Ministry of Treasury and Finance, the CBRT attended the meetings of the IMF and WB FSAP mission together with other relevant public institutions and organizations.
- To monitor international developments related to the climate change and green financing, the CBRT became a member of the Network for Greening Financial System (NGFS) on 14 December 2021.
- The swap agreement with the People’s Bank of China, which had been renewed in 2019, was revised on 4 June 2021. A swap agreement was signed on 12 August 2021 with the Bank of Korea, and another one with the Qatar Central Bank signed in 2018 was revised on 17 September 2021.
- With new agreements signed with the central banks of Uzbekistan, United Arab Emirates and Turkmenistan, the number of memorandums of understanding established with other central banks to foster bilateral cooperation in the field of central banking reached 37.
- As part of technical cooperation with central banks, a total of 73 videoconferences were held with 32 central banks and one banking institute, and the CBRT hosted two study visits. Besides, to hold bilateral dialogue at the highest level, the CBRT held meetings with other central banks and officials of the resident foreign missions in Türkiye.
- As part of Türkiye’s accession to the European Union (EU), the CBRT continued to contribute to the adjustment to the EU legislation on the issues that fall in its remit and attended the meetings held with EU institutions throughout the year.
CULTURAL, ENVIRONMENTAL AND SOCIAL SENSITIVITY
In addition to fulfilling its main mandates and responsibilities, the CBRT continued to act with sensitivity to cultural and environmental issues, took part in social responsibility activities, and further contributed to academic studies with donations and aids.
- The CBRT continued to award scholarships to the graduates of Derince Anatolian High School who have enrolled in a university and who satisfy specific criteria. The number of scholarship recipients in 2021 reached 34, eight of whom were granted their awards in the 2021-2022 academic year. A total of 128 students have benefited from the scholarship since 2002, the year in which the first students graduated from the High School.
- As part of the Financial Support Program for Academic Studies, financial support was provided to 11 out of the 14 conferences that applied for it.
- To limit climate and environment-related risks, the CBRT established the “Green Economy and Climate Change Division” on 4 November 2021 to carry out financial studies related to climate change by improving the institutional capacity and expertise.
- The CBRT Banknote Printing Plant was awarded the Basic Level Zero Waste Certificate on 9 August 2021. The Zero Waste Management System allows preventing waste, using resources more efficiently, averting or minimizing waste generation, and ensuring that waste is collected separately and recycled as material, energy or a new product. The Zero Waste Certificate mainly serves to prevent pollution and protect the environment, yet, in a broader perspective, it creates an infrastructure for sustainability studies, and makes significant contributions to curbing carbon emissions and therefore to the prevention of climate change thanks to the benefits it provides.
- To restore the forests that have largely been ravaged by wildfires in different regions of the country, the CBRT donated 1,000,000 saplings to the “Breath for the Future” planting campaign launched by the Ministry of Agriculture and Forestry.
- In the context of corporate social responsibility activities, the CBRT donated 3,162 miscellaneous furniture items (tables, chairs, computers, etc.) to 29 public institutions in 2021.