Don’t Blame The Cbrt
In recent years there has been a lot of speculation and even more bordering on conspiracy theories about the Central Bank of Republic of Turkey (CBRT) and the interest lobby.
The latter is more of an illusive nature and is outside our filed. We thought it would be useful for our readers to have accurate information, to be more precise, the CBRT itself.
We have obtained some of the information from the official and public website of the CBRT. We hope that sharing it will enlighten some laymen blaming economic crisis and failures in monetary policy on the governance of CBRT. Two documents are within this article should you wish to have historic and elaborate details about the bank.
“The CBRT was established as a joint stock company on 11 June 1930. The primary objective of the Bank is to achieve price stability. The CBRT is also responsible for taking measures to sustain the stability of the financial system in Turkey. Particularly, the Bank strives to contain the macro financial risks stemming from global imbalances. Accordingly, maintaining financial stability is defined as the supporting objective of the Bank.”
“The privilege of printing banknotes in Turkey was initially vested with the Grand National Assembly of Turkey. The Assembly has transferred the privilege of printing and issuing banknotes exclusively and indefinitely to the CBRT.”
“One of the main responsibilities of the CBRT is to determine the exchange rate regime jointly with the government. The CBRT is responsible for and authorized to design and implement the exchange rate policy in line with the agreed exchange rate regime. Since 2001, the floating exchange rate regime has been implemented in Turkey.”
“The CBRT is in charge of managing the gold and FX reserves of Turkey. Reasons for holding international reserves are to establish and maintain confidence in monetary and exchange rate policies, provide FX liquidity for the Treasury’s domestic and foreign debt services, reduce the economy’s susceptibility to endogenous and exogenous shocks, boost the confidence of international markets in the Turkish economy.
The CBRT is also responsible for establishing and securing the uninterrupted functioning of payment, security transfer and settlement systems to enable safe and swift transfer of money and securities.”
What is not included in this introductory information by the bank is the actual shareholding of CBRT. Mr Mahfi Egilmez in his recent article in a daily newspaper has enlightened us.
Mahfi Egilmez started as a Deputy Inspector of Finance in public service in 1972. Furthermore he served as Auditor, Assistant General Manager of Revenues, Head of Public Institutions and Affiliates of the Treasury Department, Assistant General Manager of Treasury Public Finance, Economic and Commercial Counselor of the Embassy of Washington, Director General of Public Finance of the Undersecretariat of Treasury and Foreign Trade, Deputy Undersecretary of Treasury and Foreign Trade, Economy and Trade Principal Consultant and Undersecretariat of Treasury Counselor of the Embassy of Washington. He was appointed to the Undersecretariat of Treasury in 1997. He left the public service at the end of 1997. He served as a member and chairman of the board in various banks and financial sector organizations in private sector between 1997-2006. He resigned in 2006. He was a lecturer for economic policy at İstanbul Bilgi University between 2001 and 2010. He is currently a lecturer for economic policy at Kadir Has University.
Mr Egilmez states that, as at year end of 2016, 55.12 % of holdings represented by (A) Class shares are held by the CBRT and according to law shares held by CBRT can not be below 51%. (B) Class shares representing 25.74 % of CBRT is in the hands of national banks active in Turkey. (C) Class shares represent 0.02 % of banks outside the national banks and other privileged and licensed companies and according to the law these cannot exceed 15,000 shares. The remaining 19.12 % represented by (D) Class shares are held by Turkish trading companies, other individuals and corporations of Turkish citizenship.
In the articles of association, the law or regulation there is no entitlement or privilege to anyone to take decisions, vote or otherwise participate in the management of CBRT by anyone other than CBRT itself.
According to law, more than 49 % of shareholding of CBRT cannot be held by anyone else than the CBRT itself.
As at year-end of 2016, foreign holding in CBRT was represented by (C) Class shares of 0.02 %.
To conclude, unless the law governing the structure and governance of CBRT changes there is no way that foreigners can own or run the CBRT. The Central Bank of the Republic of Turkey was established in 1930 with local and national capital and Turkish citizens govern and manage it; duly appointed by the governments of the Republic of Turkey.