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Barış Soydan: The only objective is not to reduce the interest, but the main objective of the government is to use the balance of the Central Bank.

New president of the Central Bank Shahap KavciogluThe most curious and stressful issue in the markets is when and how fast will interest decrease … This is, of course, important, but the government’s objectives for the Central Bank are not just interests. First impressions on Kavcıoğlu are that they also want to use the Central Bank balance sheet in the new period.

“Using the balance of the Central Bank” means using the bank’s resources and instruments explicitly or implicitly for economic policy purposes. Examples of this are the former Minister of Finance and Finance Berat Albayrak Began to meet during period. TL 21 billion of the reserves on the bank’s balance sheet are transferred to the Treasury. get olderThe change in the conditions for the transfer of annual profits to the Treasury opened the door to financing from the Treasury and Finance through the use of the Central Bank’s balance sheet. Meanwhile, even accusations arose that the annual profit was shown high due to inadequate methods in calculating the revaluation.

It is understood that liquidity and credit opportunities will come to the fore in the use of the Central Bank’s balance sheet in the new period. For example, it will not be surprising that investment loans, which are expected to be available through commercial banks or investment development banks, have cheap, long-term opportunities outside of market conditions. The door to this practice was opened during the period of the Albayrak. It will probably be applied more aggressively during this period.

SMEs may also have long-term, low-cost credit facilities. In order to make the balance sheets of the banking sector more liquid, securitization of long-term loans, such as mortgage loans, and ensuring that they are acquired by the Central Bank may also be on the agenda. Studies on these had begun in the last period.

Or, the Central Bank’s liquidity can be offered on more favorable terms to banks that lend at low interest rates and increase lending in certain areas.

A sign that the Central Bank may resort to such a policy under the presidency of Şahap Kavcıoğlu, a columnist for the Sabah newspaper Dilek Güngör ‘recently written for fame, it was summer. For the Central Bank, “Are alternative methods unthinkable?” Güngör asked:

I’m not talking about going back to the complexity of the interest broker that entered our lives in the 2010s and that we just got rid of. For example, some central banks around the world developed various applications during the pandemic. The European Central Bank is one of them… Perhaps it does not change interest rates in line with market expectations, but it facilitates the conditions of long-term refinancing operations. Reduce the interest rates that apply there. Also, the Central Bank of Israel has a lending program aimed at banks. Financial institutions finance themselves at lower interest rates, as long as they deliver them to small and micro enterprises. The Central Bank of the pandemic period, especially in Turkey, implemented a similar program for exporters. Is it not possible to make them permanent? Is it possible to consider separate financing interests for investment-production?

Continuation of the article here.

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