TBB Başkanı ve Genel Müdürümüz Alpaslan Çakar Anadolu Ajansı Finans Masası'na Konuk Oldu

First of all, thank you very much for the invitation. With your permission, before coming to the policy rate, I would like to step back a bit and take a general picture. Our country's biggest problem is inflation. We have to manage inflation because inflation, above all, reduces predictability, negatively affecting investment decisions, projections, feasibility, and thus production and growth. It is a very important problem that directly negatively affects sustainable growth. Inflation, above all, causes serious problems in taxation, especially working against low-income individuals, leading to social problems and negatively affecting overall productivity. Therefore, we have to solve this in any case. Looking at the country's growth, the healthiest and best growth was achieved in the 2004-2019 period when inflation averaged 8.5% and growth was 7.8%. So we see that the country actually grows more healthily in a low-inflation environment. Within the scope of this fight against inflation, a roadmap called the Medium-Term Program was created in our country in September 2023, a disinflation program was established. This program is not a one-way program but a multi-faceted program that plans the entire ecosystem. It emerged as a 3-year program including monetary policy, fiscal policy, income policy, and also its communication and coordination. Within the framework of that program, the disinflation process began. So where are we today? We can say that in 2023, the inflation rate averaged around 65%. Last year we closed around 44%, and today with the data announced, we closed at 42%. But looking at the nature of inflation, we need to divide it into three: core goods inflation is around 20-27%, services inflation unfortunately remains high, especially in rent, health, and education. We see that services inflation is higher, and we clearly see this in the monthly inflation announced today. The main parameters affecting the monthly 5% inflation again come from services inflation. Inflation has both demand and cost dimensions, but especially the correct management of expectations is important. Looking at expectation inflation, household inflation expectations are still high, around 60-65-66%. For the real sector, it is around 47%. For market makers and market players, it is around 27%. But the important thing is that even though real sector and household inflation expectations are high, we see that they are in a downward trend with each survey. It is gradually decreasing. In the Medium-Term Program, this year's inflation target was set in a band range of 21% to 26%. We are on the right path, and we all observe that this trend is coming downward with a certain momentum. With this program, tight monetary policy was a part of it. Now we see that domestic demand is being controlled, growth is more driven by external demand. In addition, the current account deficit has decreased significantly. International commodity and energy prices have worked in our favor this period. Hopefully they will continue to do so. Considering all these, the inflation trend is coming down within a certain path. As for the policy rate, the Central Bank makes its decision based on the data set and inflation trend. In the last two MPC meetings, they reduced the rate from 50% to 45% in two steps, a total of 500 basis points. The fact that the 45% rate has entered a downward trend is a very pleasing development for economists, the banking sector, and our country. At least it shows that the Medium-Term Program is yielding results, that we are gradually moving towards normalization, a lower interest rate environment, and a more reasonable price stability. This is very valuable. You also asked about the change in the meeting schedule from 12 to 8 meetings. Actually, we previously had a 12-meeting schedule, but due to the volatile conjuncture, meetings were held 12 times a year. We have essentially returned to the old 8-meeting schedule. Today, in the US and the Eurozone, there is also an 8-meeting structure; the Fed and ECB hold 8 meetings. So it is parallel to their schedule. This is a more reasonable and better period for ensuring instrument independence, communication, more accurate data analysis, and better capturing the inflation trend. As for the impact on the banking sector, contrary to what is thought, the banking sector is one of the sectors that most wants interest rate cuts. Why? Because we know that without price stability, there is no financial stability. Without financial stability, you cannot achieve macroeconomic stability. In a country with macroeconomic stability, you make more rational investment decisions, feasibility becomes more rational, more predictable, and you can price the future better. This leads to better investment decisions and healthier customer relationships. It allows you to measure customer credibility better, and NPL ratios become healthier. Another important point for us is that the main funding source of the Turkish banking sector is deposits; we act as an intermediary. We take savers' money as deposits and lend it to our investor customers as loans. The average maturity of deposits in Turkey is around 56-60 days. Therefore, when interest rates fall or rise, deposits are refinanced within 60 days. The asset side of our balance sheets, loans, have maturities over 2 years. So when deposit costs decrease due to policy rate cuts, our cost of deposits falls. Since loan rates follow with a lag, this positively affects our net interest margins. Therefore, I can say that as of the second half of this year, the net interest margin of the Turkish banking sector will turn more positive compared to previous years. So the sector that most wants interest rate cuts is probably the banking sector. Of course, this also leads to lower financing costs for our companies, which is something we will all be happy about.

Thank you. I partially mentioned the Medium-Term Program earlier. It was put into effect in September 2023. The main goal of that program was declared as fair income distribution and sustainable growth, and it was built on four basic pillars: first, price stability; second, budget discipline; third, sustainable current account deficit; and fourth, structural reforms. Now, with your permission, let me analyze under these headings. Looking at price stability, yes, the inflation rate was very high then. Price stability is the primary duty of the Central Bank. Today, the inflation rate has come from 65% to 42%. There is a downward trend, moving towards a more normalized trend. Looking at the balance sheets of the banking sector, in terms of deposit composition, there is a serious positive development in favor of TL deposits and a decrease in dollarization. We can say we have made good progress in terms of price stability. As for budget discipline, at that time, especially with earthquake conditions, we were talking about a budget deficit of nearly X% of GDP. In 2024, it shaped up at 4.8%. When the earthquake effect is removed, we are approaching a situation where we can go below the 3% Maastricht criterion, which shows that public expenditure rationalization and budget discipline are being achieved. Actually, throughout the 2000s, there was serious care in budget discipline, and it is pleasing to see that same care continues. As for the current account deficit, it is very important for us. In countries with low savings, when you run a current account deficit to meet investment or at least balance domestic demand, it creates foreign exchange demand, which affects the exchange rate and creates cost-push inflation. Therefore, managing the current account deficit and ensuring the balance of payments is vital. Today, our current account deficit has fallen below 1%, which is below the 2.5% target in the Medium-Term Program, below 10 billion dollars. This is very important. Of course, some factors positively affected this: as I said, international energy prices being moderate was a very important factor. Gold imports had risen to 31 billion dollars, and bringing them back under control was important. The increase in tourism revenues, we are talking about 60 billion dollars in tourism revenue, had a serious effect. So we have made significant progress in achieving a sustainable current account deficit. In addition, Central Bank reserves today are 68 billion dollars gross, excluding swaps, net Central Bank reserves are 63 billion dollars, including swaps 71 billion dollars. We have reached 63 billion dollars in reserves excluding swaps. Rating agencies have increased Turkey's rating by two notches, both of them. Also, Turkey's CDS, which is a very valuable concept for our borrowing costs, has fallen to 200-250. Considering all these points, and let me also mention that 2024 will realize with 3% growth, which is mostly driven by external demand, which is very important. Therefore, considering all these parameters, I can say that the Medium-Term Program is working correctly, moving in the right direction, and we have achieved results so far. Of course, it should be said that reducing inflation in such programs is not easy; it requires time, patience, and social consensus. But with all its elements and parties, the program is being operated and we have made serious progress, and I can confirm that we have achieved successful results.

Now, that's a good question. I said the primary duty of the Central Bank is price stability. First, ensure price stability, then financial stability. Without price stability, financial stability and macroeconomic stability cannot be achieved. While ensuring stability, our Central Bank implemented a set of rules for all sectors, and of course, the main focus was on the banking sector. I mentioned earlier how essential it is to ensure monetary policy, fiscal policy, income policy, social consensus, and its communication. Now, the banking sector in Turkey constitutes 85% of the total financial sector. We are the main transmission mechanism. The main addressee of the rule set taken by the Central Bank is again the banking sector. Inflation is fundamentally a monetary expansion phenomenon. Therefore, controlling it, managing it, ensuring the correct functioning of the transmission mechanism, managing domestic and external demand, implementing tight monetary policy, and correctly controlling the movement of money are built on the banking sector. Therefore, the banking sector plays a vital role here. Now, the Central Bank created a decision set on several basic issues. One is a rule set regarding banks' resource management. First, they wanted to increase TL deposits. They set some rules and targets for TL deposits. Looking at these targets, we see they have been achieved. TL deposits, including KKM, are now 65% of balance sheets, and the share of foreign currency deposits has fallen to 35%. So TL deposit targets were met. Second, the KKM issue. There were targets for reducing KKM. Yes, these were done. Third, some withholding tax regulations were made on deposits within the framework of fiscal policy. On the credit side, the asset side of the balance sheet, a selective credit policy has been applied for a long time. That is, a selective credit policy that does not stimulate consumption but protects the supply, production band, or certain social structures. What were these? Agriculture had no credit ceiling, nor did tradesmen. Defense industry was added later. YTB (investment incentive certificate) investments were not included, nor were export credits. These were considered selective credits and no growth limit was imposed on them. But for SMEs, a monthly growth limit of up to 2.5% (previously 1.5%), for foreign currency loans up to 1%, and for other loans up to 1.5% were set. So the Central Bank wanted to control credit more selectively and with certain limits to control monetary expansion. In this sense, they took macroprudential decisions, decisions on liquidity management, to sterilize excess money in the market. For this, they applied the reserve requirement mechanism on both TL and FX sides to withdraw money. Third, they withdrew money from the system through Central Bank deposit auctions. By doing this, a set of rules was applied to the entire banking sector regarding both assets, liabilities, and liquidity management by our Central Bank or public authority. As I said, we constitute 85% of the financial sector, and we acted in full compliance. We had to act in full compliance because of the general regulation of the authority. With our full support, I think we have made serious progress. So far, we clearly see those figures in our balance sheets.

Now, regarding macroprudential measures, we will look at this: it is actually a decision that will be given in parallel with the Central Bank's data set and the decline in inflation. The authority wants to normalize, to bring it to a mechanism of normal periods. Extraordinary periods' decisions are also extraordinary. All the constraints I mentioned in macroprudential measures, and there are others, are a set of rules and decisions taken under the conditions of that period. In the coming period, in parallel with the decline in inflation, I think these will gradually be removed from the system. For example, this year, many decisions have been taken in terms of simplification. The securities maintenance obligation was removed. The target set for TL deposits was further reduced. The obligation to collect information and documents was relaxed for some loans. For example, to protect SMEs, the credit growth limit for SMEs was increased from 1.5% to 2.5%. By intervening from time to time, they are reducing these according to conjunctural needs. I think that in 2025, these macroprudential measures will partially be in our lives, but over time they will leave our agenda.

Now, KKM was a product introduced on December 20, 2021. As its name suggests, it was a product produced under the conditions of that period. I think KKM has fulfilled its duty more than enough. Considering the Central Bank reserves, current account deficit, TL-FX balance, dollarization, foreign borrowing capability, etc., it was a product developed for that period. At one point, its share in bank balance sheets reached 26%, even 144 billion dollars. It had a TL dimension and a foreign currency dimension (DDM). The TL dimension ended in 2024. As of today, that 144 billion dollars of KKM has fallen to 29 billion dollars, and its share in total bank deposits has fallen to 5.3%. Therefore, KKM is gradually leaving our lives. It has fulfilled its duty, completed its process, and is now a product that is no longer needed. Because the current account deficit level is now very manageable. The Central Bank's net reserves, as I said, excluding swaps, have reached 63 billion dollars. Of course, this had to be exited gradually, considering the impact on bank balance sheets and the exchange rate. The Central Bank, with the right calendar and planning, has removed KKM from our lives. The TL part is gone, only the DDM remains. I think that by 2025, the KKM mechanism will completely end and close. As for foreign borrowing, the Turkish banking sector's foreign borrowing has increased from 132 billion dollars to 154 billion dollars in the last year. We have to bring the right resources from abroad with the right pricing and offer them to the service of our real sector. In the bank I manage, Ziraat Bank, we have currently borrowed around 20 billion dollars abroad. Actually, this is an ecosystem; all elements complement each other. The Central Bank's gross reserves reaching 168 billion dollars, the current account deficit decreasing, budget discipline being achieved, these affect the country's CDS score. The rating agencies increasing the rating by two notches also affects the CDS. The decrease in CDS enables the banking sector to borrow from abroad more easily and at lower interest costs. Because CDS once reached 700, now it is at 250. So borrowing costs have decreased significantly. I think that in the coming period, the rollover rate will be very high, and there will be no problem in this regard in Turkey. Because the banking sector's ratios are very good: capital adequacy ratio is very good, NPL ratio is very good. We are in good shape. Secondly, looking at our macroeconomic structure, considering the reserve issue, current account issue, CDS issue, rating issue, and being removed from the gray list, we will be able to borrow well in the coming period. For example, last April, we made Turkey's largest syndication, a 1.7 billion dollar syndication with the participation of around 70 banks from 32 countries, and it was realized very easily without any difficulty. Again, next April, we have another syndication; our colleagues are currently in negotiations, and it is going very positively. In fact, this week, we issued a Eurobond as Ziraat Bank, and the interest rate was good. It was a 7.375% 5-year product, 750 million dollars, and there was about 4-4.5 times demand. So I don't think there will be any difficulty in foreign borrowing.

Of course, the US economy is decisive for the whole world. 2024 was a year of political uncertainties in the US, Germany, France, and wars in our region. Then Trump won the US elections. He recently imposed 25% tariffs on Mexico and Canada, 110% on China, and made statements about the Panama Canal, the Gulf of Mexico, Greenland, and Canada. He says he will withdraw from the Paris Climate Agreement and wants the EU to increase defense spending. We know that globalism is over; America will become more US-centric, protectionist, and self-centered. The US economy constitutes 26% of the world economy, which is about 102 trillion dollars, with the US at 27 trillion. 180% of international trade is conducted in dollars. These are concepts that affect all economies. After the US elections, we saw an upward movement in US bonds. Going forward, volatility around Fed decisions may increase. Capital flows may shift more towards the US, especially from emerging markets. But we are in a more sheltered position. The Central Bank's reserve structure is very good, the current account deficit has decreased. America is a parameter, but I believe our Central Bank will shape its interest rate decisions based on the disinflation trend and data set. It must be considered, but as I said earlier, our borrowing capacity, the Central Bank's balance sheet, and the current account level show we are in a good, sheltered position. Some things could work in our favor. For example, Trump wants to increase oil production, which could lower energy prices and positively affect us. We need to evaluate all and position accordingly. But we will decide based on our own data set.

Let me say this. In 2024, the total growth of the banking sector was around 39%, reaching 32.7 trillion TL (926 billion dollars). Credit growth was around 38%, reaching 16 trillion TL. Going forward, the NPL situation is very positive. The sector's capital adequacy ratio is around 18%. As for profitability, the Turkish banking sector earned 659 billion TL. I should also mention that the share of TL in our balance sheets has risen to 60%, and with KKM included, it's 65%. The share of foreign currency deposits has fallen to 35%, which is a very good ratio. Our return on equity was 27%, and return on assets was 2.4%. Sometimes the sector's profitability is criticized, but when you look at the capital structure, the average ROE of the top 500 companies in the Istanbul Chamber of Industry over the last 5 years is 17%, while the Turkish banking sector's ROE is 22%. So we are operating within sector norms, maintaining our equity structure. In an environment with 40% inflation, we work with a 27% ROE average over 5 years, and our equity is sufficient to support our growth.