Central Bank of the Republic of Turkey
The CBRT was established as a joint stock company on 11 June 1930.[1] The primary objective of the Bank[2] 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.
Governors Name In office*
Selahattin Çam 1931-1938 A. Kemal Zaim Sunel 1938-1949 Mehmet Sadi Bekter 1949-1950 Osman Nuri Göver 1951-1953 Mustafa Nail Gidel 1953-1960 Memduh Aytür 1960 İbrahim Münir Mostar 1960-1962 Ziyaettin Kayla 1963-1966 M. Naim Talu 1967-1971 Memduh Güpgüpoğlu 1972-1975 Cafer Tayyar Sadıklar 1976-1978 İ. Hakkı Aydınoğlu 1978-1981 Osman Şıklar 1981-1984 Yavuz Canevi 1984-1986 Dr. Rüşdü Saracoğlu 1987-1993 Dr. N. Bülent Gültekin 1993-1994 Ş. Yaman Törüner 1994-1995 Gazi Erçel 1996-2001 N. Süreyya Serdengeçti 2001-2006 Durmuş Yılmaz 2006-2011 Dr. Erdem Başçı 19 Nisan 2011 - 19 Nisan 2016 Murat Çetinkaya 19 Nisan 2016 - CURRENT
[*] The missing years represent the office of acting governors. Governors used to be called “General Manager” or “Director General” until 1970.
In the Ottoman Empire, treasury operations, money and credit transactions and trade in gold and foreign currencies were executed in varying degrees by the Treasury, the Mint, jewelers, moneylenders, foundations and guilds. Within this structure, which continued till the second half of 19th century, the Ottoman Empire minted gold coins. The Ottoman Empire exercised the right of seigniorage for the first time in 1839. Hand-made cash banknotes called “Kaime-i nakdiye-i mutebere”, served more like interest-bearing debt instruments or Treasury bills.
During the Crimean War in 1854, the Empire resorted to foreign borrowing for the first time in its history. Thus, the need arose for an institution that would act as an intermediary between the Ottoman Government and European countries in foreign debt repayment. For this purpose, in 1856, the London-based “Ottoman Bank (Bank- Osmanî)” was founded with British capital. The powers of the Bank were limited to extending small loans; making advance payments to the government and discounting certain Treasury bills. Later, the Ottoman Bank dissolved itself and was renamed “Imperial Ottoman Bank (Bank-ı Osmanî-I Şahane or Osmanlı Bankası)”.
In 1863, it was restructured to become a state bank as a British-French partnership. The Bank was granted the privilege of issuing banknotes for a period of thirty years. Moreover, the Bank would act as the treasurer of the state and collect the state revenues, perform the payments of the Treasury and discount Treasury bills as well as making the interest and principal payments regarding domestic and foreign debts. However, the foreign capital ownership of Osmanlı Bankası led to heated debates over the years. Reactions intensified in the period of the Second Constitutional Monarchy when the idea of establishing a national central bank was formed. Attempts to establish a domestic capital-based central bank culminated in the establishment of the “Ottoman National Credit Bank (Osmanlı İtibar-ı Milli Bankası)” on 11 March 1917. However, due to the defeat of the Ottoman Empire in the First World War, the Bank failed to achieve its purpose of becoming a national bank that would replace the Osmanlı Bankası.
[1] Following the end of the First World War, a tendency to establish central banks to issue currency and manage monetary policies had emerged throughout the world. In the same period, Turkey also witnessed efforts towards establishing a central bank to reinforce the political independence achieved by the War of Independence (1919-1922) with the economic independence. The issue was first raised at the İzmir Economic Congress in 1923, with a special emphasis on the establishment of “a national state bank” that would function as “the bank of issue”. In this framework, Turkey exchanged views with central banks of other countries on establishing the Turkish Central Bank.
In 1928, Dr. G. Vissering, Head of the Board at De Nederlandsche Bank (Central Bank of the Netherlands), was invited to Turkey. In his report, Dr. G. Vissering underlined the need for establishing an independent central bank. Likewise, Count Volpi, Italy’s former Minister of Finance, maintained that establishing a central bank was essential in order to ensure the stability of the Turkish currency.
The Government of the Republic of Turkey, having evaluated all the related opinions about establishing a central bank, started to prepare the necessary legal framework for establishing a central bank. To this end, a draft bill on the establishment of a central bank was prepared with the contribution of Prof. Leon Morf from the University of Lausanne.
Finally, the Grand National Assembly of Turkey passed the “Law No. 1715 on the Central Bank of the Republic of Turkey” on 11 June 1930. The Central Bank started to operate on 3 October 1931. As a manifestation of its independence and a peculiarity that distinguishes the Central Bank from other public institutions, the Bank was established as a joint stock company and was structured as a General Directorate. Bank shares were divided into class A, B, C and D shares. Class A shares belong solely to the Treasury. Law No. 1715 stipulated that, in order to reinforce the Bank’s independence, the amount of these shares would not exceed fifteen percent of the capital. Class B shares were allocated to national banks operating in Turkey, while class C shares were allocated to banks other than national banks and privileged companies; and class D shares were allocated to Turkish commercial institutions and legal and real persons of Turkish nationality.
During the establishment process, a publicity campaign was carried out to encourage the public, especially civil servants, to purchase shares of the Bank. The main body of the Bank was the General Assembly of Shareholders. Other bodies of the Bank were: The Board of Directors, the Bank‘s highest executive body; the Commission of Auditors authorized to audit the operations and accounts of the Bank; the Discount and Credit Committee, entrusted with regulating discount and interest rates besides credit affairs; the Administrative Committee to regulate the appointment of employees as well as credit and discount procedures; the General Directorate and Branches. According to Law No. 1715, the primary objective of the Central Bank was to bolster the economic development of the country. The Bank was vested with the exclusive privilege of issuing banknotes in Turkey.
[2] Over the last nearly four centuries the spread of central banking has sprawled around the world to the point where today 99.9% of the global population live in a country with a central bank. The only major nation without a central bank apart from a few small groups of islands like Micronesia is North Korea.
The first central bank in the world was the Swedish Riksbank, founded in 1668. Scottish businessman William Paterson founded the Bank of England in 1694 on request of the British government to finance a war.
The First Bank of the USA was founded in 1791 and survived for 20 years, however, it was revived again as the Second Bank of the United States in 1816 and ceased operations in 1841. It wasn’t until 1913 that central banking made a comeback with the foundation of the Federal Reserve.