The CBRT targeted price stability in 2013 and
in accordance with this target, it continued to
oversee the financial stability.
Treasury Management
Signs of change in global liquidity conditions
Capital flows maintained their strong trend as central banks of
developed countries maintained their expansionary monetary
policies in the first months of 2013. However, in May, the Fed’s
increased emphasis on limiting the expansionary monetary
policy and finally ending it influenced the markets adversely.
The markets followed a volatile trend in 2013 due to the
challenges such as the debt ceiling in the U.S. and high
unemployment in the Euro Zone, as well as the signals of
change in expansionary monetary policies that were significant
for the economies of developing countries and supporting
global liquidity.
The CBRT used monetary policy tools effectively and
dynamically.
At the end of 2012, the CBRT lowered both the upper and lower
bands of the interest rate corridor in order to keep any macro
financial risk likely to arise due to capital inflows during 2013.
The CBRT also decreased policy rates in April and May due to
stronger capital inflows and expectations of an increase in
Turkey’s sovereign ratings as well.
In the beginning of the second half of the year, the CBRT
continued to apply a tight monetary policy in a bid to limit the
impact on the domestic economy of the uncertainties in the
global economy. In the same period, the CBRT continued to
apply the required reserve ratio and Reserve Option Mechanism
(ROM) together and reduced the amount of funding that it
had offered the market, in an attempt to limit loan growth and
support foreign exchange reserves.
The CBRT widened its interest rate corridor by raising lending
rates in July and August as the fragility in global economy
started to be priced in especially from June onwards. In addition,
The CBRT adopted the policy of increasing foreign exchange
liquidity through foreign exchange selling auctions as a reaction
to the weakness in capital inflows while heading for additional
monetary tightening.
The CBRT effectively and dynamically deployed the tools of
monetary policy that includes reserve requirement policy and
liquidity management as well as interest rate policy to ensure
financial stability. Thus, via affecting both the market liquidity
and the interest rates, it had been provided that the market
reacted quickly and elastically to the volatility in short term
capital flows and the loan growth was kept at a balance.
Developments in funding costs in 2013
Turkey received its “investment grade” rating from two
institutions after 21 years thanks to the increase of Fitch in
November 2012 and Moody’s increase in May 2013.
In parallel with this, liquidity in foreign markets following a trend
in favor of the developing countries in the first half of 2013
strengthened the positive expectations. The fall in interest
rates was accelerated by overall positive trends in the markets
and the CBRT’s policies. In this period, funding costs gradually
decreased for the bank and for the overall banking sector
resulting with a positive influence on sector profitability.
In the second half of the year, CBRT raised its lending rates
to 7.75%with the increases in July and August and led to
additional monetary tightening to expand the upper limit of
the interest rate corridor. While additional monetary tightening
resulted in increased funding costs for banks, it was also
effective in raising interest rates in the market.
The balance sheet composition of banking sector
The sector’s asset size expanded by 26.4% to TL 1,732 billion in
2013, marking a growth rate of 13.8 percentage points in excess
of the 12.6% growth rate recorded in 2012.
The positive trend in the economic activity formed in spite
of the increase in funding costs in the second half of 2013,
accelerated the increase in the loan volume of the banking
sector when compared to 2012. In 2013, banking sector
loan volume growth was recorded to be 31.8%, the sector
loan volume reaching TL 1,047 billion, whereas in 2012, the
banking sector loan volume growth rate was at the level of 16.4
percentage points.
Activities
45
İşbank
Annual Report 2013
