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III. Financial World I: Money & Banking

III. Financial World I: Money & Banking. Monetary System & Policy. 1. Introduction. Reflecting the developments of the real part. 2. Managing Money a. Remembering the Basics. The Development Of Capitalism. Liberalization of Financial markets & Globalization. Establishment of

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III. Financial World I: Money & Banking

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  1. III. Financial World I:Money & Banking MonetarySystem & Policy

  2. 1. Introduction Reflecting the developments of the real part

  3. 2. Managing Moneya. Rememberingthe Basics The Development Of Capitalism Liberalization of Financial markets & Globalization Establishment of Central Banks

  4. PrimaryFunctions of Money Money neededforthreepurposes • Medium of exchange • Unit of account • Store of wealth • Transactions • Speculative • Precautionary

  5. TheDevelopments of CB in The World Kaynak: The Development of Central Banking, Nisan 1994, BOE

  6. b. Historical Background of TCMB August 1989- Turning Point of Liberalisation Movement: Opening up foreign capital accounts fully and making the TL convertible. After 1980: Budget financing from CB gradually eliminated. Public Sector started to sell bonds and notes to have revenues. Borrowing from both domestic & foreign sources become a dominant trend.

  7. c. Restructuring of Institutional Framework. A Digression: The Changing Role of The CB The primary function of the CB is, by managing the monetary variables both domestic and foreign , to accomplish price stability which in practise means achieving a targeted rate of inflation every year.

  8. d. Tools of MonetaryPolicy For the regulation of money supply there are four primary tools that are used by the CB:

  9. RequiredReserveRatio(%)Türk Lirası Disponibilite( currentrates) YabancıPara( USD $ or Euro) Kaynak: TCMB

  10. RRR(%)To hold cash or near cash values according to their deposit liabilities

  11. TheRediscount is a specialtype of interestthat CB chargeswhenlendingmoneytobanks. Rediscounting is done by, Setting an upper limit Changing of interestcharged in general orforsomespecific sectors Specifyingthetype of papersthatwill be accepted.

  12. Open Market Operation REPO is a repurchasing agreement whereby valuable papers are sold with a specific price and are bought back at the end of a specific time, and the seller gets his money back with interest. If REPO agreement made with foreign currencies, which is called a swap. DBNS is abbreviated from domestic borrowing notes of state.

  13. Interest Rate The CB decides Theovernightborrowingandlendingratesforinterbankdealings. Withwhat is calledTheLate Liquid Windowthe rate of Borrowingandlending in Interbank Money Marketsforonenight The rate of borrowingpossibilitieseitherforonenightoroneweekforthe OMO.

  14. Overnight(O/N) Tarih Borç Alma Borç Verme 20.02.02 57.00 62.00 25.04.03 41.00 48.00 05.02.04 24.00 29.00 11.01.05 17.00 21.00 02.01.06 13.50 16.50 14.09.07 17.25 22.25 18.01.08 15.50 19.50 17.06.09 8.75 11.25 17.07.09 8.25 10.75 19.08.09 7.75 10.25 17.09.10 6.25 8.75 05.08.11 5.00 9.00 21.10.11 5.00 12.50 22.02.12 5.00 11.50 19.09.12 5.00 10.00 19.10.12 5.00 9.50 21.11.12 5.00 9.00 Kaynak: TCMB

  15. The Late Liquid Window Tarih Borç Alma Borç Verme 20.02.02 5.00 62.00 15.10.03 5.00 36.00 20.12.04 5.00 26.00 09.12.05 5.00 21.50 21.07.06 13.50 25.50 14.12.07 11.75 23.00 19.12.08 11.00 20.50 20.11.09 2.50 12.00 17.12.10 0.00 12.00 21.10.11 0.00 15.50 22.02.12 0.00 14.50 19.09.12 0.00 13.00 19.10.12 0.00 12.50 21.11.12 0.00 12.00 Kaynak: TCMB

  16. e. Closer Look at Aggregates

  17. Tablo 3. 2001-2003 Dönemi TCMB Bilanço Gelişmeleri(Trilyon TL)

  18. Tablo 4. Main Monetary Indicators, 2005-2010.

  19. B. The Banking System Basics Theprimaryfuntion of thebankingsystem is to facilitatemoneyandcreditmarkets. Bankscollects as manyassets as possibleandlendthem totheircustomerswith an interest rate.

  20. 2. A Brief Historical Background During the 1970s: It was the high inflation years.The Gap btw interest rate & inflation widened 25-30 points. Until end of Second World War: Banks are publicly owned: Sümerbank,Etibank. End of the 1970s: A new warket created openly outside the banking system called bankers or money brokers. But this practice was halted partly by administrative measures. Until 1980s Dominant banking activity was financing production and growth process for industralisation policy.

  21. Kaynak: BDDK

  22. Kaynak: BDDK

  23. Slides prepared by Kamer Olkay Aşık, DEU Faculty of Business, Student of Practical Training Class under guidance of Prof. Sedef Akgüngör

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