Download I. Macroeconomic Outlook

Central Bank of the Republic of Turkey
I. Macroeconomic Outlook
Volatilities in financial markets continue, while portfolio
movements and risk indicators regarding the emerging
economies follow a fluctuating course. The change in the
risk indicators for the emerging economies was triggered by
concerns about the Chinese economy, the downtrend in
commodity prices and the uncertainties regarding the US
monetary policy. Measures taken in emerging economies
to boost resilience against external shocks bear a particular
importance.
Leading indicators regarding the Turkish economy
suggest that domestic demand was moderate and net external
demand improved moderately in the second half of the year.
The consumer price inflation rose slightly in this period due to
increased food prices and exchange rate developments.
Uncertainties surrounding the global monetary policies and
the slow growth trend particularly in emerging economies
affected the global risk appetite negatively in terms of portfolio
investments. Nevertheless, resident banks kept their external
borrowing at more reasonable and sustainable levels and costs
in certain borrowing types were lower compared to the previous
year. On the other hand, it seems impossible to anticipate when
and how the uncertainties related to external developments
will come to an end. Therefore, supporting the rebalancing
process with excessive borrowing-oriented macroprudential
policy measures has been important in terms of keeping macro
financial imbalances at reasonable levels. In this context,
implementations supporting core liabilities and encouraging
longer term external borrowing started yielding results.
I.1. International Developments
Chart I.1.1
Capital Flows to Emerging Economies
(Weekly, Billion USD)
Bonds
90
Equities
70
In the second half of the year, portfolio investment outflows
from emerging markets accelerated and financial indicators
50
30
10
followed a fluctuating course. Outflows from the stock market
are particularly significant (Chart I.1.1). During this period, risk
-10
-30
-50
due to capital movements, the exchange rates and stock
markets of these economies plummeted and recorded their
Financial Stability Report - November 2015
-70
-90
01.07
06.07
11.07
04.08
09.08
02.09
07.09
12.09
05.10
10.10
03.11
08.11
01.12
06.12
11.12
04.13
09.13
02.14
07.14
12.14
05.15
10.15
premia of emerging economies also increased. Meanwhile,
Source: EPFR
3
Central Bank of the Republic of Turkey
Chart I.1.2
CDS Premiums for Emerging Economies and JP Morgan
Exchange Rate Index
Emerging Economies*
420
Selected Emerging Economies**
increase in the bond yields of emerging economies (Chart I.1.3).
100
Recently rising risk appetite enabled a slight recovery in interest
80
rate, exchange rate, equity prices and credit default swap
60
(CDS) indicators, yet uncertainties regarding global markets are
300
240
180
40
120
10.15
07.15
04.15
01.15
10.14
07.14
04.14
01.14
0
10.13
0
07.13
20
04.13
60
01.13
credit and exchange rate risk premia was also reflected as an
120
JP Morgan EM Currency Index
360
lowest levels after the global crisis (Chart I.1.2). The uptrend in
still significant.
The risk perception towards emerging economies was
* Emerging economies include Brazil, Czech Republic, Indonesia, South Africa, Colombia,
Hungary, Mexico, Poland, Romania, Chile and Turkey.
**CDS premia of Brazil, Indonesia and South Africa have been used to calculate the
average of selected emerging economies.
Source: Bloomberg
shaped by three main developments. Growth concerns in
emerging economies, particularly in China, and the downtrend
in commodity prices as well as the US monetary policy and
Chart I.1.3
Government Bond Yields in Emerging Economies
the uncertainties related to communication strategy of this
(10 year, percent)
Brazil
Indonesia
South Africa
18
policy have affected the macro financial outlook for emerging
India
Russia
Turkey
economies.
16
14
12
10
Expectations regarding the US monetary policy continue
8
to be effective on global financial markets. The economic
6
4
recovery in the US continues. Accordingly, the labor market has
2
07.15
03.15
11.14
07.14
03.14
11.13
07.13
03.13
11.12
07.12
03.12
11.11
07.11
03.11
11.10
07.10
03.10
0
Source: Bloomberg
improved and the unemployment rate has converged to precrisis levels. However, the number of part-time employees is still
above pre-crisis levels and wages have not exerted an upward
Chart I.1.4
Unemployment and Inflation Rate* in the US
pressure on inflation yet (Chart I.1.4). Commodity prices stand
(Percent)
Unemployment Rate
Inflation Rate (right axis)
12
5
10
4
at low levels and the US dollar remains strong, which suggests
that the inflation will be below the targets for a bit longer. These
developments signal that the pace of the Fed’s interest rate
3
8
2
6
1
4
0
-1
0
-2
01.05
08.05
03.06
10.06
05.07
12.07
07.08
02.09
09.09
04.10
11.10
06.11
01.12
08.12
03.13
10.13
05.14
12.14
07.15
2
hike may be considerably slow. In fact, the Federal Reserve
Board members revised the interest rate forecasts downwards
in the September meeting compared to the June meeting. The
ongoing differentiation in the expectations of the market and
the Federal Reserve Board members regarding the interest
* This rate reflects PCE Index.
Source: Bloomberg
rate hike suggests that the sensitivity of financial markets to
Chart I.1.5
Expectations of the FOMC Members and the Market
(End-year, percent)
4.5
FOMC Members
data and Fed communication may continue in the short term
(Chart I.1.5).
Market
4
The slowdown in the Chinese economy and the current
3.5
3
policy practices in China may have a significant impact on other
2.5
2
emerging economies. China has been going through a change
1.5
from an investment-based growth model to a consumption-
1
0.5
based growth model. The country has vulnerabilities resulting
0
-0.5
2015
2016
2017
2018
Long term
* Fed fund futures rates have been used for market expectations. Median of FOMC
Members’ interest rate expectations have been used.
Source: CME Group, Fed
4
from the high indebtedness level in the financial sector and
firms as well as from the growing shadow banking sector. The
Financial Stability Report - November 2015
Central Bank of the Republic of Turkey
tendency to shift to a market-based financial system and the
efforts to reduce the current vulnerabilities pose a risk on the
Chart I.1.6
Emerging1 and Advanced Economies’ Growth Rates
(Percent, Annual)
Developing Countries excluding China and India
US
Euro Area
China (right axis)
outlook of the Chinese economy.
8
16
and Chart I.1.7). This downtrend in commodity prices reduces the
09.15
03.15
09.14
03.13
03.14
09.12
03.07
09.13
0
with the impact of the weakened demand in China (Chart I.1.6
03.12
2
-8
09.11
-6
03.11
4
previously, has deepened especially in energy and metal prices
09.10
6
-4
03.10
-2
09.09
8
in commodity prices, which was due to supply-side effects
03.09
10
0
downward movement in commodity prices. The downtrend
09.08
12
2
03.08
14
4
The slowdown in the Chinese economy reinforces the
09.07
6
(1) Weighted by each country’s share in global GDP.
Source: Bloomberg, CBRT.
input costs of commodity importing countries and accordingly
constrains inflationary pressures. On the other hand, it negatively
affects public finances of commodity exporting countries and
Chart I.1.7
Commodity Prices
(Index, USD)
debilitates the growth outlook. In addition, if the currency of
S&P Metals Index
China continues to depreciate in the upcoming period, then
it may confine the competitiveness of other countries. Such
concerns about the Chinese economy constitute another
140
490
120
450
100
410
80
370
60
330
40
290
20
250
0
01.10
05.10
09.10
01.11
05.11
09.11
01.12
05.12
09.12
01.13
05.13
09.13
01.14
05.14
09.14
01.15
05.15
09.15
factor feeding into the volatility in global markets.
It is important that emerging countries continue to take
steps towards boosting resilience against external shocks.
Crude Oil (right axis)
530
Source: Bloomberg
The FX loan utilization of the non-banking sector in emerging
economies has been in an uptrend since the global crisis (Chart
I.1.8 and I.1.9). Therefore, the strengthening of the US dollar
Chart I.1.8
Total Loans in Emerging Economies
(Percent of GDP)
has the potential to affect firms’ balance sheets negatively.
250
It is crucial in such a conjuncture that measures to increase
200
resilience against a likely additional tightening in external
150
conditions are kept in place.
100
2008
2015
50
Mexico
Indonesia
India
South Africa
Russia
Brazil
Turkey
Poland
Hungary
China
0
Source: BIS
Chart I.1.9
FX Corporate Loans in Emerging Economies
(Percent of GDP)
2008
2015
40
35
30
25
20
15
10
5
South Africa
Indonesia
Brazil
Poland
Turkey
Russia
Mexico
0
Source: BIS
Financial Stability Report - November 2015
5
Central Bank of the Republic of Turkey
Box
I.1.1
International Financial Regulation and Reform Studies
Since the global financial crisis, a broad reform agenda has been created for the global
financial system to eliminate vulnerabilities and make financial institutions more resilient. This
reform agenda has been developed and implemented by the leadership of the G20, which was
established to increase coordination of economy policies and reinforce the financial system in
the aftermath of the global financial crisis. Building resilient financial institutions, ending the toobig-to-fail problem, making the derivatives markets safer and decreasing the shadow bankingbased risks are the core elements of the reform agenda. There has been significant progress in
the completion of the reform agenda which has been put into practice in certain areas. The
Basel Committee on Banking Supervision (BCBS) and the Financial Stability Board (FSB), under the
leadership of the G20 of which Turkey holds the presidency, play a significant role in reform studies.
The following three headings lead the priority list regarding financial regulations:
• Timely, consistent and full implementation of financial reforms,
• Finalizing remaining post-crisis financial reforms,
• Addressing new risks and vulnerabilities.
Basel Committee’s Studies
Several reforms have been put into practice since 2008 to strengthen the international
banking regulatory standards. The Basel III framework developed by the BCBS is an important
element of these reforms. Risk-based capital requirements have been reviewed with Basel III. The
quality and the quantity of capital have been increased. The common equity Tier 1 capital ratio,
which has the highest capacity to absorb losses, has been raised from 2 percent to 4.5 percent.
The capital framework has been supported with macroprudential elements. Accordingly, a
2.5-percent capital conservation buffer has been introduced. To strengthen capital and reduce
procyclicality in times of rapid credit growth, a countercyclical buffer has been imposed within
a range of 0 to 2.5 percent. An additional Tier 1 capital requirement of 1 to 3.5 percent has been
introduced for global systemically important banks to address systemic risk originating from financial
interconnectedness. Moreover, the definition of “large exposures” has been narrowed and the
exposure of a bank to a single counterparty has been limited to 25 percent of its Tier 1 capital. This
ratio is tighter (15 percent of the Tier 1capital) for exposures of global systemically important banks
to each other. To capture all risks better, capital calculations for the market risk, securitization
exposures and counterparty credit risk have been revised. A leverage ratio has been introduced
to constrain leverage in the banking sector, supplement the risk-based capital requirement and
reduce model risk and measurement errors. The leverage ratio is not risk-based and is calculated
by dividing the Tier 1 capital by the exposure measure composed of on-balance sheet and offbalance sheet exposures, derivative exposures and securities financing transactions. The Basel
III has also been the first regulation to introduce global liquidity standards, develop the liquidity
coverage ratio and the net stable funding ratio. The objective of the liquidity coverage ratio is to
ensure that banks have sufficient high quality liquid assets to offset their net cash outflows lasting
for 30 days, while the objective of the net stable funding ratio is to ensure that banks fund their
long-term assets with long-term liabilities and to increase the share of core funding in total funding.
6
Financial Stability Report - November 2015
Central Bank of the Republic of Turkey
With a view to enabling the banking sector to function accurately and reducing incentives
that encourage taking excessive risks, governance and compensation principles at banks and
banking supervision principles have been reviewed.
To facilitate timely, full and consistent implementation of reforms, the BCBS has adopted
a Regulatory Consistency Assessment Program through which it monitors the adoption of Basel III
standards. Up to this date, assessment reports of 22 countries have been released.
In the upcoming period, the BCBS will work to ensure a simple, comparable and risk-sensitive
calculation of risk-weighted assets. To this end, standard methods for credit risk, market risk and
operational risk are being revised. The use of internal models will be reviewed. The use of internal
models will be confined to certain risks and portfolios, parameters used in internal models will
be restricted or a standard approach-based capital framework will be set for the capital level
calculated with the internal model. Calibration of the capital framework will be completed
with the calibration of the leverage ratio. Capital calculations will be differentiated for simple,
transparent and comparable securitizations. The interest rate risk in the banking book is under
review. The BCBS is planning to finalize the ongoing reform studies at end-2016. In addition, the
Committee has initiated a study to review the sovereign exposures and policy options. The related
policy suggestions are expected to be offered for consideration at end-2016.
FSB’s Studies
Although significant progress has been made in reform studies, there have been delays in
certain areas. The greatest progress in the over-the-counter derivatives markets reform has been
made in the reporting to trade repositories and the capital regulations for non-centrally cleared
derivatives. On the other hand, many countries lack margin requirements for non-centrally
cleared derivatives, or regulations in this area are not fully implemented yet. There is very little
progress regarding the settlement of cross-border issues. Legal barriers to countries’ deference to
each other’s regulations, reporting to trade repositories and data sharing with authorities should
be removed.
Regulations regarding banks have been completed to end the too-big-to-fail problem. In
this framework, the FSB has published the regulation on the total loss-absorbing capacity for global
systemically important banks (See Box IV.1.1). There are also studies for too-big-to-fail non-bank
institutions. In this scope, the International Association of Insurance Supervisors (IAIS) issued higher
loss absorbency requirements for global systemically important insurers. Moreover, there are
ongoing studies on the possible effects of liquidity risks in asset management activities on financial
stability. Finally, the role of central counterparties (CCP) in the financial system has increased. In
this respect, studies on the CCP resilience, recovery planning and resolvability are important in
terms of preventing the CCPs from becoming too-big-to-fail.
The growing importance of market-based finance necessitates the monitoring of this
sector for risks and vulnerabilities. On the market liquidity and the activities of asset management
companies, the FSB points to the importance of stress testing of funds. In 2016, the FSB will work on
likely structural vulnerabilities and policy measures.
Financial Stability Report - November 2015
7
Central Bank of the Republic of Turkey
The market misconduct risk has the potential to create systemic risks by shaking the
confidence in financial institutions. The FSB has devised an action plan regarding this issue, which
includes the identification of the current situation and the measures to be taken if needed. The
action plan covers subjects such as the effectiveness of post-crisis reforms in reducing market
misconduct risk and how the standards in the fixed income securities, commodities and currency
markets can be improved.
The decline in correspondent banking services, driven by concerns about money laundering
and terrorism financing risks as well as rules for paying due diligence to know the customer, limits
the access of local banks and economies of some countries to the global economy. Therefore,
the task force established by the leadership of the FSB and the World Bank has launched an action
plan to address this issue.
Finally, there are ongoing works on the potential risks to the financial sector from climate
change. Climate change is expected to affect the financial sector through physical risks (surges
in insurance costs due to a rise in disasters such as floods and storms), liability risks (compensation
demands for damages stemming from climate change) and transition risks (transition to a lower
carbon economy).
8
Financial Stability Report - November 2015
Central Bank of the Republic of Turkey
I.2. Domestic Developments
Chart I.2.1
Contribution to Growth From The Spending Side
(Percentage Point)
In the second quarter of 2015, the stable growth trend in
Final Domestic Demand
Change in Inventories
12
Net Exports
GDP Growth
10
the economic activity continued. The largest contribution to
economic growth came from final domestic demand in this
period, whereas the contribution of net exports was negative
(Chart I.2.1). Meanwhile, up-to-date data indicate that the
net external demand’s contribution to growth will surge in
8
6
4
2
0
-2
-4
more moderate. The employment growth was strong in the first
06.15
03.15
12.14
09.14
06.14
03.14
12.13
06.13
09.13
-6
the second half of the year, while domestic demand will be
Source: CBRT, TURKSTAT
quarter of the year but decelerated in the second quarter. The
rise in labor force participation rates observed since April has
Chart I.2.2
Price Indices
led to a slight increase in the unemployment rate.
(Annual Percentage Change)
CPI
11
11
H Index
I Index
Inflation climbed on the back of food prices and
exchange rates. Hikes in unprocessed food prices played a
10
10
9
9
09.15
10.15
cost pressures on inflation intensified due to exchange rate
06.15
5
03.15
5
12.14
I.2.2). Although dollar-denominated import prices declined,
09.14
6
06.14
6
03.14
indirectly through their impacts on food service prices (Chart
12.13
7
09.13
8
7
06.13
8
significant role in the rise in consumer inflation both directly and
Source: CBRT, TURKSTAT
developments. Inflation is estimated to float above the target
for a bit longer because of the lagged effects of exchange rate
Chart I.2.3
Cumulative Portfolio Flows1
movements.
(Billion USD)
30
5
0
0
-5
occasionally, domestic developments also had influence on
the fluctuations in markets. On the other hand, portfolio flows
have recovered slightly in the recent period due to the partial
Nov
Dec
10
5
Oct
15
10
Sept
regarding global monetary policies and global growth, while
20
15
July
contraction in portfolio flows resulted mainly from uncertainties
25
Aug
fluctuations in portfolio inflows to Turkey (Chart I.2.3). The
30
20
June
and concerns about the global growth have added to the
2012
25
May
policies
2015
April
monetary
2013
2014
Mar
global
Feb
regarding
Jan
Uncertainties
2011
-5
-10
-10
(1) Calculated by weekly net portfolio flows. Includes data on repo, GDDS and securities
portfolio as well as banks’ off-balance sheet FX position.
Source: BRSA, CBRT
improvement in global risk perceptions. Uncertainties about the
risk perceptions for emerging economies have had a significant
Chart I.2.4
Exchange Rates and Turkey’s 5-Year CDS Prices
effect on the Turkish lira in addition to the currencies of these
countries (Chart I.2.4).
Euro/TL
USD/TL
3.5
340
CDS (RHS)
3.3
310
3.1
280
2.9
2.7
250
2.5
220
2.3
190
2.1
160
1.9
130
11.15
09.15
06.15
03.15
12.14
09.14
06.14
03.14
12.13
09.13
06.13
1.7
Source: CBRT, Bloomberg
Financial Stability Report - November 2015
9
Central Bank of the Republic of Turkey
Government domestic debt securities (GDDS) yields,
Chart I.2.5
GDDS Generic Yield and Transaction Volume
which had been in an upward trend at the start of the year,
(Percentage, Million TL)
2 Year
5 Year
13
2,500
10 Year
GDDS Transaction Volume (5 day MA) - RHS
12
2,000
demonstrated a downward trend since September (Chart
I.2.5). The liquidity in the GDDS secondary market improved
moderately due to the decline in interest rates. However, there
11
1,500
was not a strong growth in foreign investors’ demand for these
10
1,000
securities (Chart I.2.6).
9
500
8
7
11.15
09.15
07.15
05.15
03.15
01.15
11.14
09.14
07.14
05.14
03.14
01.14
0
The CBRT implemented a tight monetary policy to contain
Source: Bloomberg, BIST
the impact of exchange rate movements as well as energy and
food price volatilities seen since the start of the year on inflation
and inflation expectations. In this framework, the average
Chart I.2.6
Non-residents’ holdings of GDDS 1
(Percent)
funding rate was gradually raised. While the CBRT continued
31
29
2012
2014
2013
2015
29
21
21
19
19
17
17
15
15
Nov
Oct
Aug
Jul
May
Mar
the share of marginal funding was increased more and more.
Accordingly, there was an upward trend in average funding
rates. The overnight market interest rates hovered around the
marginal funding rate. Thus, the difference between the 5-year
market interest rate and the interbank overnight repo rate was
Dec
23
Sep
23
Jun
25
Apr
27
25
Jan
27
Feb
to offer funding predominantly via one-week repo auctions,
31
1) Calculated by non-residents’ holdings of government domestic debt securities (GDDS)
over total GDDS
Source: CBRT
Chart I.2.7
CBRT Rates and BIST Interbank O/N Rates (Percent)
16
CBRT Average Funding Rate (5 days MA)
16
14
BIST Interbank Market O/N Rates (5 days MA)
14
12
12
10
10
8
8
6
6
4
4
2
2
in commodity prices, the ongoing cautious monetary policy
stance and the reasonable level of loan growth achieved
by macroprudential measures. The current account deficit is
financed largely through long-term sources and direct capital
investments. The share of portfolio and short-term fund flows in
external financing has significantly weakened in recent months.
10.15
08.15
06.15
04.15
02.15
12.14
10.14
08.14
06.14
04.14
02.14
12.13
-4
10.13
-4
08.13
-2
06.13
0
04.13
0
-2
02.13
The current account balance continues to improve (Chart
18
5-Year Market Rate
12.12
the year (Chart I.2.7).
I.2.8). This improvement has resulted mainly from the decline
5 Year-3 Month Interest Differential
18
kept at levels that were negative or close to zero throughout
Source: CBRT, BIST
The fiscal discipline contributes to bringing down both the
risk premiums and inflation. As of the second quarter of 2015,
Chart I.2.8
Current Account Deficit and Financing Items¹
the central government budget deficit markedly decreased
(12-Month Cumulative, Billion USD)
compared to the previous quarter’s data (Chart I.2.9). The
PorƞŽlio and Short-term
FDI and Long-term
Current Account DeĮcit
90
downward trend in public debts continues. The fact that
80
70
borrowing is mostly fixed rate, Turkish lira denominated and with
60
longer tenures increases the resilience of public finance against
50
40
external shocks (Chart I.2.10).
30
20
10
0
08.15
05.15
02.15
11.14
08.14
05.14
02.14
11.13
08.13
05.13
02.13
11.12
08.12
05.12
02.12
11.11
08.11
-10
Source: CBRT
10
Financial Stability Report - November 2015
Central Bank of the Republic of Turkey
The ongoing stable rebalancing process and the
macroprudential measures boost the resilience of Turkey’s
Chart I.2.9
Central Government Budget Balances
(12-Month Cumulative, Percent of GDP)
Budget Balance
financial system against potential global financial marketsbased risks. The uncertainty in global financial markets is
expected to last for a bit longer. It is important in this process that
Primary Balance
2
1
the financial system’s external borrowing remains moderate
0
and borrowing maturities expand. In this respect, the increase
account deficit continues owing to macroprudential measures.
06.15
03.15
12.14
09.14
06.14
03.14
12.13
-2
09.13
favorable development while the rebalancing in the current
-1
06.13
in external borrowing’s term to maturity is accepted as a very
Source: Ministry of Finance
Chart I.2.10
Composition of Central Government Debt Stock and
Average Days to Maturity1 (Month)
FX Denominated
Floating Rate
Fixed Rate
Average Maturity of Domestic Debt Stock (RHS)
Average Maturity of External Debt Stock (RHS)
150
100%
115.1
80%
100
60%
56.0
40%
50
20%
0
2015Sep
2014
2013
2012
2011
2010
2009
2008
2007
2006
0%
(1) Data of days to maturity pertains to September 2015.
Source: Undersecretariat of Treasury
Financial Stability Report - November 2015
11
Central Bank of the Republic of Turkey
Box
I.2.1
An Analysis of the International Investment Position by Sectors
The International Investment Position (IIP) shows at a point in time the stock value of financial
assets of residents in an economy that are claims on nonresidents, gold bullions and foreign
currency held as reserve assets, as well as the value of the liabilities of residents to non-residents.
The IIP has been compiled and released by the CBRT since 1996. It serves as an important data
source for external debt and risk analyses as it offers detailed, comprehensive and comparable
information in a breakdown by sector, financial instrument and maturity. In this framework, this box
presents an analysis of the asset and liability positions implied by the IIP on a sectoral basis as well
as the maturity breakdown of liability items for all sectors.
Chart I.2.1.1
Net IIP by Sectors (Billion USD)
200
100
0
-100
-200
-300
-400
-500
Central Bank
General Government
Banks
Other Sectors
2015-Q3
2015-Q2
2015-Q1
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
-600
Net IIP
Source: CBRT
In the IIP, the difference between total financial assets and total financial liabilities is called
the “net IIP”. In other words, the net IIP shows the difference between Turkey’s claims on nonresidents and its liabilities to non -residents. The net IIP increased in a negative direction until 2012,
except for 2008 and 2011. In 2012 and after, the net IIP was relatively flat at approximately USD
-400 billion.
External liabilities of all main sectors in the IIP are greater than their external assets, with the
exception of the Central Bank. Other sectors and banks stand as the largest sectors composing
the net IIP.
The largest liability item of the General Government is the portfolio investment that covers
debt securities. Debt securities consist of GDDS issued by the Undersecretariat of Treasury in the
domestic market and purchased by non-residents as well as the total bond stock (excluding the
portion purchased by residents) issued abroad by the Undersecretariat of Treasury. The uptrend
observed in this sector’s liabilities until 2012 reversed in 2013 and liabilities started declining (Chart
I.2.1.2). On the other hand, the official reserve assets is the largest asset item of the CBRT in terms of
the IIP. This item refers to the total of external assets having a gold and foreign currency equivalent
under the control of the Central Bank (Chart I.2.1.3).
12
Financial Stability Report - November 2015
Central Bank of the Republic of Turkey
Chart I.2.1.2
Net IIP of the General Government (Billion USD)
Chart I.2.1.3
Net IIP of the Central Bank (Billion USD)
150
50
100
0
Other Investments (Liability)
2015-Q3
2014
2015-Q2
2015-Q1
2013
2012
2011
2010
2007
2009
2008
2004
2006
2003
2005
2001
2015-Q3
2015-Q2
2014
2013
2015-Q1
2012
2011
2008
2010
2007
2009
2006
2005
2002
-50
2004
-150
2003
0
2001
-100
2002
50
-50
Currency and Deposits
Loans (Liability)
Reserve Assets
Other Investments (Asset)
International Investment Position, net
Portfolio Investments (Liability)
Other Investments (Asset)
International Investment Position, net
Source: CBRT
Chart I.2.1.4
Net IIP of Banks (Billion USD)
Chart I.2.1.5
Net IIP of Other Sectors (Billion USD)
60
80
40
0
0
-40
-80
-60
-120
-160
-120
-200
-240
-180
-280
-320
2015-Q3
2015-Q2
2015-Q1
Other Investments (Liability)
Portfolio Investments (Liability)
Direct Investments in Turkey
Portfolio and Other Investments (Asset)
Direct Investments Abroad
International Investment Position, net
2014
2013
2012
2009
2010
2011
2006
2007
2008
2005
2004
2001
2003
-360
2002
2015-Q2
2015-Q3
2015-Q1
Other Investments (Liability)
Portfolio Investments (Liability)
Direct Investments in Turkey
Portfolio and Other Investments (Asset)
Direct Investments Abroad
International Investment Position, net
2014
2011
2013
2012
2010
2008
2009
2007
2005
2006
2003
2004
2002
2001
-240
Source: CBRT
An analysis of banks’ net IIP suggests that the uptrend in liabilities accelerated particularly
after 2008 but followed a flat course after 2014. This development is attributed to the legal
arrangement introduced in 2009 regarding FX and FX-indexed loans. In addition, loan utilization
and bond issues abroad have surged in recent years.
The net IIP of other sectors remained on the liability side throughout the analysis period and
posted a rapid increase especially in the period between 2001 and 2007. After 2007, it oscillated
in a flat band. Direct investments in Turkey constituted the largest liability item of other sectors. This
item constituted 40.8 percent of the total liabilities of other sectors as of end-September 2015. It
was followed by long-term loans (32.1 percent) and equity securities (10.7 percent) (Chart I.2.1.5).
Financial Stability Report - November 2015
13
Central Bank of the Republic of Turkey
The maturity breakdown of sectors’ liability items shows that long-term liabilities predominate
in all sectors other than banks. As of the end of 2015-Q3, the ratio of long-term liabilities to total
liabilities was 86.5 percent in the CBRT, 67.8 percent in the General Government and 76.2 percent
in Other Sectors. An analysis of the maturity structure of the banking sector’s liabilities reveals that
the share of long-term liabilities was higher until 2010 but then dropped below 50 percent in line
with the hike in short-term loans. In 2015, with a view to supporting financial stability, the CBRT
changed the reserve requirement ratios for foreign exchange-denominated liabilities of banks
and financing companies in order to encourage the extension of maturities of non-core liabilities.
Consequently, there has been a shift from short-term loans to long-term loans. As of the end of
2015-Q3, the ratio of banks’ long-term liabilities to the banking sector’s total liabilities stood at 56.2
percent (Chart I.2.1.6).
Chart I.2.1.6
Maturity Breakdown of Liabilities (Billion USD)*
Central Bank
25
Banks
General Government
150
2015-Q2
2015-Q3
2015-Q1
2013
2014
2011
2012
2009
2010
2008
2006
2007
2004
2005
2003
2001
2015-Q3
2015-Q1
2015-Q2
2013
2014
2012
2010
2011
2008
2009
2007
2006
0
2005
50
0
2003
100
5
2004
150
10
2002
200
15
2001
20
2002
250
Other Sectors
350
300
250
100
200
150
50
100
50
2015-Q3
2015-Q2
2015-Q1
2013
2014
2012
2011
2010
2009
2008
2006
2007
2005
2004
2003
2001
2015-Q3
2015-Q2
2015-Q1
2014
2013
2012
2010
2011
2009
2008
2007
2006
2005
2004
2003
2001
2002
Short-term Liabilities
2002
0
0
Long-term Liabilities
Source: CBRT.
* Long term liabilities consist of long term loan stock of banks and private sector, direct investment in Turkey, long term debt securities of banks and private sector and Eurobond issues
of the Treasury. Short term liabilities consist of short term loan stock of banks and private sector, short term debt securities of banks and private sector, equities held by non-residents,
deposits on resident banks and GDDS issued by the Treasury in the domestic market and purchased by non-residents.
14
Financial Stability Report - November 2015