Evaluating the Performance of Central Bank of the Republic of Turkey 2010
Evaluating the Performance of Central Bank of the Republic of Turkey
2010
Table of Contents
Table of Contents............................................................................................................................................21. General Background Information...........................................................................................................3
1.1. Historical Background.....................................................................................................................31.2. TCMB Duty and Authority..............................................................................................................3
1.2.1. The fundamental duties and powers of the Bank......................................................................41.2.2. Fundamental powers of the Bank.............................................................................................41.2.3. Main advisory duties of the Bank.............................................................................................5
2. TCMB Strategic Plan..............................................................................................................................62.1. Vision...............................................................................................................................................62.2. Mission.............................................................................................................................................62.3. Policies.............................................................................................................................................62.4. Strategic Areas and Themes.............................................................................................................6
2.4.1. Public Area Themes..................................................................................................................62.4.2. Global Area Themes.................................................................................................................72.4.3. Corporate Area Themes............................................................................................................7
3. Swot Analysis of Central Bank of the Republic of Turkey....................................................................84. Income Statement Analysis....................................................................................................................95. Balance Sheet Analysis.........................................................................................................................116. Related Ratios.......................................................................................................................................147. PROJECT PAPER INTERVIEW EVALUATION FORM.................................................................158. Conclusion............................................................................................................................................169. References.............................................................................................................................................16
1. General Background Information
1.1. Historical Background
Central Bank of Turkey is the oldest bank in Turkey which was inherited by the Ottoman Bank
which was established at 1856. At first it only functioned as a discounter for government treasury bonds
and borrower for the Ottoman Empire. After1863 it was re-established as a U.K. and French partnership
and gained the title of being the Ottoman Empire`s Central Bank. With this title it started to press money
in behalf of the government. As being the central bank it also started to conduct the treasury`s tasks such
as collecting the government`s receivables, paying the payables calculating interests for empire`s inner
and outer debts. During this period the main capital source of the central bank was hardly criticized by the
public and eventually at 11 March 1917 a new bank named Osmanlı İtibar-ı Millî Bankasi was established
but due to the World War 1 it could not find the chance of being an international bank which will function
as the central bank of Ottoman Empire.
After the World War 1 a tendency towards establishing an independent monetary policy emerged
and with the political independency which was acquired with Independence War, the government
accelerated its operations and eventually at 3 October 1931 Turkiye Cumhuriyet Merkez Bankasi has
started its operations as an independent company from the Government of Turkey Republic.
Its main building is currently located at Istiklal Street, Istanbul-Turkey and is currently employing 4401
workers around Turkey. It has branches at 21 provinces of Turkey and has offices around the world and
has shares which are publicly traded.
In 11 June 1930, according to law of 1715, Central Bank of the Republic of Turkey has founded
with 15 million liras capital as an incorporation and it started to operations in 3 October 1931.
Authorization of issuances of TL would handled by TCMB and this authorization is extended to 1999 in
1955, and in 1994 it increased forever.
1.2. TCMB Duty and Authority
Article 4- (As amended by Law No. 4651 of April 25, 2001)
The primary objective of the Bank shall be to achieve and maintain price stability. The Bank shall
determine on its own discretion the monetary policy that it shall implement and the monetary policy
instruments that it is going to use in order to achieve and maintain price stability.
The Bank shall, provided that it shall not be in confliction with the objective of achieving and
maintaining price stability, support the growth and employment policies of the Government.
1.2.1. The fundamental duties and powers of the Bank
The fundamental duties of the Bank shall be;
to carry out open market operations,
to take necessary measures in order to protect the domestic and international value of Turkish Lira
and to establish the exchange rate regime in determining the parity of Turkish Lira against gold
and foreign currencies jointly with the Government; to execute spot and forward purchase and sale
of foreign exchange and banknotes, foreign exchange swaps and other derivatives transactions in
order to determine the value of Turkish Lira against foreign currencies,
to determine the procedures and conditions of reserve requirements and liquidity requirement by
taking into consideration the liabilities of banks and other financial institutions to be deemed
appropriate by the Bank,
to conduct rediscount and advance transactions,
to manage the gold and foreign exchange reserves of the country,
to regulate the volume and circulation of Turkish Lira, to establish payment, securities transfer and
settlement systems and to set forth regulations to ensure the uninterrupted operation and oversight
of the existing or future systems, to determine the methods and instruments including electronic
environment for payments
to take precautions for enhancing the stability in the financial system and to take regulatory
measures with respect to money and foreign exchange markets,
to monitor the financial markets,
to determine the terms and types of deposits in banks and the terms of participation funds in
special finance houses
1.2.2. Fundamental powers of the Bank
The privilege of issuing banknotes in Turkey shall rest exclusively with the Bank.
The Bank shall determine the inflation target together with the Government and shall in
compliance with the said target adopt the monetary policy. The Bank shall be the ultimate body
authorized and responsible to implement the monetary policy.
The Bank shall, with the objective to achieve and maintain price stability, be authorized to utilize
monetary policy instruments described in this Law and shall also be authorized to directly
determine and implement other monetary policy instruments that it deems appropriate.
The Bank shall, under extraordinary conditions and in cases when the resources of the Fund are
insufficient, be authorized to grant advance to the Savings Deposits Insurance Fund in accordance
with the procedures and conditions that it shall determine.
The Bank shall, as the lender of last resort, carry out the operations of extending credits to banks,
The Bank shall, in accordance with the procedures and conditions that it shall determine, be
authorized to request from banks, the interest rates to be charged in credit operations and deposit –
taking.
The Bank shall, in order to monitor financial markets, be authorized to request necessary
information and to gather statistical information from banks, other financial institutions and from
establishments and institutions authorized to regulate and supervise the said institutions.
1.2.3. Main advisory duties of the Bank
The Bank shall be the financial and economic advisor, the fiscal agent and the treasurer of the
Government. The relation of the Bank with the Government shall be maintained through the Prime
Minister.
The Bank shall present its views to the Government, on the issues to be requested with respect to
financial system.
The Bank may convey its opinions and observations regarding banks and other financial
institutions that it shall deem appropriate to the Prime Ministry and to institutions authorized to
regulate and supervise the said establishments and institutions.
The Bank shall be authorized and empowered to set forth and implement regulations pertaining to
the duties and powers entrusted to it by this Law and legislation, and shall be authorized and
empowered to supervise the compliance with these regulations and the accuracy of the information
submitted at these establishments and institutions subject to the said regulations.
The Bank shall enjoy absolute autonomy in exercising the powers and carrying out the duties
granted by this Law under its own responsibility.
The Bank shall participate to the bankrupt’s estate as a privileged creditor for the amount of its
claims and the interest pertaining to them, in the event of bankruptcy of the bank, person or
institution with whom the Bank undergoes a transaction during the course of implementing
monetary policy instruments. Actions for damages caused by the personnel of the Bank during the
performance of their duties shall only be filed against the Bank.
The right of recourse of the Bank shall be reserved.
2. TCMB Strategic Plan
2.1. Vision
Independence, powerful organization structure and qualified employees, technological advance and
efficient decision making abilities Central Bank of the Republic of Turkey would be leading Central Bank
in the world.
2.2. Mission
Money market, credit and capital market in the first instance; TCMB provides price stability and
regulations for financial stability, manage FX and Gold reserves of the country, issues banknotes, provide
banknote safety in velocity, set up payment systems and manage them, as a liable for transparent
corporate provide value added to its employees, stakeholders and society.
2.3. Policies
1. Independency
2. Transparency and accountability
3. Credibility
4. Public Welfare
5. Effectuality and effectiveness
2.4. Strategic Areas and Themes
In the bank’s strategic plan, the duties given by law and corporate internal support systems collected in 3
strategic areas. These are named as public, global and corporate also they divided into sub titles in it.
2.4.1. Public Area Themes
1. Price stability
2. Financial stability
3. Payment systems
4. Reserve management
5. Fiscal agency, consultant and treasurer for government
6. Emission policy
7. Banks and financial institutions audit
8. Providing statistical data and publish
9. Contact, transparency and accountability
2.4.2. Global Area Themes
1. Role in the central banks’ network
2. Effectiveness and determinativeness in international platforms
3. Effectiveness in near hood of country
4. Role in entrance of European Union
5. Conformity to international norms
6. Liabilities from international agreements
2.4.3. Corporate Area Themes
1. Leadership, governance and strategic planning
2. Quality management system
3. Organization structure
4. Human Resources and education processes
5. Technologic infrastructure and informatics systems
6. Corporate internal communication
7. Construction, logistics and external support services
8. Public relation, demonstrations and activities on external areas of the bank
9. Internal Control System
10. Audit
11. Legal structure
12. Information and documentary management
13. Corporate continuity and security
14. Accounting and budgeting
15. Services in branches
3. Swot Analysis of Central Bank of the Republic of Turkey
Strenghts- EFT- Technology compliance- Strategic location for supreme courts and other decision making mechanisms- Strong banking sector in the country
Weaknesses-Cumbersome structure- Employee saturninity- Veteran employees opposition to change
Opportunities
-New system to determining liquidity by using reserve requirements- Benefit from strong political authority- Stand clear of 2009 financial crisis
Threats- In strategic alteration, thus uncertainity obstruct decision making process.-By using overnight rates, The Central Bank sets the liquidity level this also causes an uncertainity in the economy
4. Income Statement Analysis
As of 2011 As of 2010Weights (%)
Change between the years 2010-2011 (%)
1) Interest Income 5.092.633,004.724.633,00
1,233062
7,788965
Haricteki muhabir hesaplarindan alinan faizler 958.664,00 838.113,000,232118
14,38362
Interest income gained from open market operations 3.568.480,002.970.925,00
0,864024
20,11343
Interest incomes gained from external credits 5.691,00 5.579,000,001378
2,007528
Differences arising from valuation for us 522.767,00 904.250,000,126576 -42,1878
Other Interes income 10.031,00 5.766,000,002429
73,96809
2)interest expense 962.563,002.864.321,00
0,233062 -66,3947
interest expenses paid for credit noted foreign currency (Kredi mektuplu doviz mevduat faizleri) 503.849,00 430.859,00
0,121995
16,94058
interest expenses paid to open market operations 24,001.174.799,00 5,81E-06 -99,998
Interbank operations interest expenses 3.037,00 452.620,000,000735 -99,329
Interest expenses paid to deposits 1.035,00 798.855,000,000251 -99,8704
Interest expenses paid to Treasury 116.883,00 14,00 0,0283834778,6
Differences arising from valuation against us 326.131,000,078965
Other Interest expenses 11.604,00 7.174,00 0,0028161,75077
3)Net income/(expense) from financial assets(1-2) 4.130.070,001.860.312,00 1
122,0095
4)Net fee and commission income 116.041,00 72.945,000,028097
59,08013
Fee and commission income 129.388,00 83.416,000,031328
55,11173
Fee and commission expense 13.347,00 10.471,000,003232
27,46634
5)Non-Interest Income 7.685.124,001.119.471,00
1,860773 586,496
Portfolio profit 0
Foreign exchance profits 7.247.224,001.096.429,00
1,754746
560,9843
Security Valuation 364.620,000,088284
Non-Interest Incomes 73.280,00 22.986,000,017743
218,8027
6)Non-Interest Expenses 1.917.561,001.542.454,00
0,464293
24,31885
Portfolio losses 532.163,00 186.363,00 0,12885 185,551
1 9Foreign exchange losses 167.681,00 373.657,00 0,0406 -55,1244Security losses 304.184,00 0 -100
Personnel expenses 438.138,00 431.114,000,106085
1,629267
Provisions 545.529,00 80.723,000,132087
575,8037
Amortisation expenses 18.555,00 16.899,000,004493
9,799396
Other Non-Interest Expenses 170.495,00 149.514,000,041281 14,0328
8)Profit before income tax (3+4+5+6)10.013.674,00
1.510.218,00
2,424577
563,0615
9)Income tax expense 1.448.474,00 222.089,000,350714
552,2043
0
10)Profit for the year (8-9) 8.565.200,001.288.129,00
2,073863
564,9334
5. Balance Sheet Analysis
ASSETS As of 31.12.2011As of 31.12.2010
Total Weight (%)
Change between the years 2010-2011 (%)
GOLD 18.981.412,00 8.361.219,007,207854 127,0173
International Standard (FX) 18.667.555,00 8.138.467,00
7,088672 129,3743
Non-International Standard (TRY) 303.857,00 222.752,00
0,115384 36,41045
FOREIGN EXCHANGE 148.199.669,00 124.794.215,00
56,27619 18,75524
Foreign Banknotes 455.132,00 461.465,000,172828 -1,37237
Correspondent Accounts 147.415.008,00 124.062.823,00
55,97823 18,82287
Reserve Tranche Position 329.529,00 269.927,00
0,125133 22,08078
COINS 79.451,00 104.946,00 0,03017 -24,2934DOMESTIC CORRESPONDENTS 1617672
0,614282
SECURITIES PORTFOLIO 47379034 20022980
17,99135 136,6233
Government Domestic Debt Instruments 47.379.034,00 20.022.980,00
17,99135 136,6233
Bonds 38.976.099,00 13.572.419,0014,80048 187,1714
Treasury Bills 8.582.935,00 6.450.561,003,259217 33,05719
Other 0DOMESTIC CREDITS 3.023.163,00 689.345,00
1,147992 338,5559
Banking Sector 3.023.163,00 689.345,001,147992 338,5559
Rediscount 3.023.163,00 689.345,001,147992 338,5559
As Per Art 40/1-c of Law No:1211 0Other 0Credits to SDIF 0OPEN MARKET OPERATIONS 39.644.657,00 12.014.961,00
15,05435 229,9608
Repurchase Agreements 39.644.657,00 12.014.961,00
15,05435 229,9608
Cash 39.644.657,00 12.014.961,0015,05435 229,9608
Foreign Exchange 0
Securities 39.644.657,00 12.014.961,0015,05435 229,9608
Securities 0Other 0
FOREIGN CREDITS 29.535,00 29.299,000,011215 0,805488
SHARE PARTICIPATIONS 48.174,00 39.446,00
0,018293 22,12645
FIXED ASSETS 270.610,00 281.319,000,102759 -3,80671
CLAIMS UNDER LEGAL PROCEEDINGS 0TREASURY LIABILITIES DUE TO SDR ALLOCATION 3.310.425,00
2.564.228,00 1,25707529,10026
REVALUATION ACCOUNT 0INTEREST AND INCOME ACCRUALS 75.438,00 26.659,00
0,028646 182,9739
MISCELLANEOUS RECEIVABLES 820.318,00 367.842,00
0,311501 123,0082
OTHER ASSETS 43.918,00 41.844,000,016677 4,9565050
T O T A L 263.343.476,00 169.338.303,00 100 55,513240
CURRENCY ISSUED 55.103.174,00 48.937.560,0020,92445 12,59894
LIABILITIES TO TREASURY 405.122,00 368.215,00
0,153838 10,02322
Gold (TRY) 33.043,00 24.224,000,012547 36,40604
Reserve Tranche Facility (1) 329.529,00 269.927,00
0,125133 22,08078
Other (Net) 42.550,00 74.064,000,016158 -42,5497
FOREIGN CORRESPONDENTS 1.388,00 21.280,00
0,000527 -93,4774
TOTAL DEPOSIT 128.093.771,00 89.269.411,0048,64133 43,49122
1)Public Sector 18.334.749,00 14.881.043,006,962295 23,20876
1a) Hazine genel ve ozel butceli idareler 18.247.523,00 14.708.274,00
6,929172 24,06298
1b) Public institutions 10,00 21,00 3,8E-06 -52,3811c) Iktisadi devlet tesekkulleri 45.290,00 44.143,00
0,017198 2,598373
1d) other 41.926,00 128.605,000,015921 -67,3994
Banking Sector 91.294.778,00 56.150.507,0034,66757 62,58941
Free Deposit of Domestic Banks 40.663.144,00 34.636.803,00
15,44111 17,39866
Foreign Banks 7.645,00 7.975,000,002903 -4,13793
Required Reserves (Central Bank's Law, Art.40) 50.632.765,00 21.505.485,00
19,22689 135,4412
Other 224 244,00 8,51E-05 -8,19672Miscellaneous 17.424.600,00 17.589.614,00 6,61668 -0,93813
2Foreign Exchange Deposits by Citizens Abroad 17.366.530,00 17.539.030,00
6,594631 -0,98352
Other 58.070,00 50.584,000,022051 14,79915
International Institutions 8.935,00 6.687,00
0,003393 33,61747
Extrabudgetary Funds 1.030.709,00 641.560,000,391393 60,65668
Saving Deposits Insurance Fund 5,00 25,00 1,9E-06 -80
Other 1.030.704,00 641.535,000,391392 60,66216
LIQUIDITY BILLS 0OPEN MARKET OPERATIONS 40.078.502,00 13.101.902,00 15,2191 205,8983Repurchase Agreements 39.562.502,00 12.000.002,00
15,02316 229,6875
Cash 0Foreign Exchange 0Securities 0
Securities 39.562.502,00 12.000.002,0015,02316 229,6875
Other 516.000,00 1.101.900,000,195942 -53,1718
FOREIGN CREDITS (FX) 16.826,00 13.899,00
0,006389 21,05907
COLLATERALS & DEPOSITS AGAINST L/C ON IMPORTS 945.855,00 747.358,00
0,359172 26,55983
NOTES & REMITTANCES PAYABLE 1.086,00 3.293,00
0,000412 -67,021
SDR ALLOCATION 3.130.425,00 2.564.228,001,188723 22,0806
CAPITAL (2) 46.234,00 46.234,000,017557 0
1) Paid Capital 25,00 25,00 9,49E-06 02) Capital-Inflation correction differences 46.209,00 46.209,00
0,017547 0
Reserve Fund 5.016.154,00 4.588.399,001,904795 9,322533
1) Adi ve Fevkalade 4.655.509,00 4.232.648,001,767847 9,99046
2) Particular (Hususi) 7.273,00 2.379,000,002762 205,7167
RESERVE FUNDS (2) 353.372,00 353.372,000,134187 0
PROVISIONS 1.612.923,00 371.154,000,612479 334,5697
REVALUATION ACCOUNT 19.498.213,00 7.245.849,00 7,4041 169,0949INTEREST AND EXPENSE
567.747,00 628.421,00 0,215592
-9,65499
ACCRUALS (1)MISCELLANEOUS PAYABLES 42.973,00 32.748,00
0,016318 31,22328
OTHER LIABILITIES 226.883,00 110.223,00
0,086155 105,84
Net Profit 8.565.200,00 1.288.129,003,252482 564,93340
Total Liabilities 263.343.476,00 169.338.303,00 100 55,51324
6. Related Ratios
I. Earnings and Efficiency Profitability Ratios As of 2011:1 Return on Asset (ROA)
Net Income / Total Average Assets 0,0325248233 Income Expense Ratio
Total Income / Total Expense 4,4365301634 Avarage Return of Interest Earning Assets
Total Interest Income / Total Average Interest Earning Assets 1,3661420175 Avarage Cost of Funds
Total Interest Expense / Total Average Interest Bearing Liablities 0,0203162236 Ratio of Non Interest Income to Non Interest Expense
Non Interest Income / Non Interest Expense 4,0077598577 Break-Even Ratio
(Total Expenses - Non Interest Income) / Total Average Interest Earning Assets -1,589394948
8 Ratio of Net Interest Income to Avarage Total AssetsNet Interest Income / Total Average Assets 0,087170836
9 Ratio of Total Operating Expenses to Total Income(Total Operating Expense / Total Operating Income) 0,249515948
10 Ratio of Interest Expense to Interest IncomeInterest Expense / Interest Income 0,233062151
11 Percantage of Non-Interest Income in Total Income(Non-Interest Income / Total Income) 0,650444165
12 Operating Expenses required to Manage Assets(Operating Expense / Total Average Assets) 0,007281597
13 Interest Profitability of Interest Earning AssetsNet Interest Income / Average Total Interest Earning Assets 0,081942261
15 Efficiency RatiosNon Interest Expense /( Interest Income - Interest Expense + Non Interest Income) 0,650444165
III. Liquidity Ratios27 Deposit to Loan Ratio 92,39
Total Loans / Total Deposits29 Ratio of Foreign Currency Assets to Foreign Currency Liabilities
Foreign Currency Assets / Foreign Currency Liabilities 106772,0958Ratio of Interest Earning Assets to Total Assets
33 Interest Earning Assets / Total AssetsRatio of Contingent Liabilites and Commitments 0,011592078Total Contingent Liabilites and Commitments / Total AssetsPercentage of Non-Performing Loans in Total Loans 0,011479924
40 Loan Concentration Risk RatioTotal Big Loans / Total Loans 0,001027593
7. PROJECT PAPER INTERVIEW EVALUATION FORM
NAME OF BANK: TCMB NAME OF STUDENT: Emre Günbeyi & Ahmet Balcı
I. To be completed by student:
1. How effective was your interview?5ٱExcellent
2. How do you rate the quality of the answers given to your questions?5ٱExcellent
3. If this bank offered you a job, would you want this bank personnel to be your manager?5ٱDefinitely
II. To be completed by bank manager:
1. How effective was your interview?5
ٱExcellent
2. How do you rate the quality of the questions asked to you?
5ٱExcellent
3. If this individual applied to you for a job in your bank, would you want to work with him/her?
5ٱDefinitely
DATE: 26.02.2012NAME OF BANK MANAGER: Central Bank Of Republic Of Turkey Market General Directorate, Fx Market Manager, Bulent Usta
Note:All elements used in this paper are from student works and critiques about the bank can not be associated with Mr. Usta
8. Conclusion
With the help of the technology compliance, benefiting from strong banking sector in the country
and high credibility of the government TCMB has opportunity to increase its value and show its potential
in practice. Despite using new implementations causes a uncertainty for the banks’ decision making
process, TCMB has a great credibility from the side of supreme authority and the whole economy.
However, cumbersome structure can be covered as weakness in the way of its significant
implementations.
TCMB is a non-profit organization which gives services to whole economy, but though it has
increased its net income by %122 between the years 2010-2011, and for this reason its profits rose by
%564. Also as of 2011 it has increased its total assets by %55 percent, for this reason it has a ROE of %3
and income expense ratio of 4.43 as mentioned above. Also it has a low cost of funding (%2) which makes
it more profitable
Besides of its financial position, it has increased its reserves by %135, which makes it a very
strong bank against a market risk.
9. References
TCMB Operation Reporthttp://www.tcmb.gov.tr/ Access Date: 01/05/12
History of TCMBhttp://www.tcmb.gov.tr/yeni/banka/tarihce.html Access Date: 30/04/12
Balance Sheet of TCMBhttp://evds.tcmb.gov.tr/yeni/cbt-uk.html Access Date: 24/02/12
Income Statement of TCMBhttp://www.tcmb.gov.tr/yeni/mgm/denetim2011/2011audit.pdf Access Date: 24/02/12