VKF_FRAE_2017

65 VakıfBank Annual Report 2017 VakıfBank carried out a dynamic liquidity management program by evaluated decisions of the monetary policy, expectation of inflation and pricing behavior of CBT’s and other central banks. The high level of inflation and the resulting deterioration in the inflation outlook created risks for pricing behavior, such that the Central Bank tightened its monetary policy gradually in the period of January-April 2017, and maintained this stance thereafter. The CBRT kept the funding provided through the overnight lending rate stable, and most of the system’s funding needs were provided via the Late Liquidity Window. As a result of the tight liquidity policy implemented, the CBRT’s weighted average funding rate increased and moved in parallel to the Late Liquidity Window interest rate. In the last quarter of the year, the high level of inflation and cost-side developments aggravated risks concerning expectations and pricing behavior. In this respect, the CBRT decided to tighten its monetary stance at the last meeting of the Money Market Council and raised the lending interest rate within the framework of the Late Liquidity Window from 12.25% to 12.75%. After the low level it reached in July, inflation started to rise due to the depreciation of the Turkish Lira against the exchange rate basket and the rise in commodity prices. It was seen that, owing to cost-side pressures and strong economic activity, demand conditions were no longer bringing inflation down. A downward trend appeared in unemployment rates starting from the beginning of 2017. Growth started to accelerate in the second quarter of 2017 as domestic demand gained momentum, and this strong performance lasted until year-end. The strong fiscal discipline of the recent years has been one of the main dynamics protecting Turkey against negative external shocks. »» FLEXIBLE LIQUIDITY MANAGEMENT VakıfBank carried out a dynamic liquidity management program by monitored developments in domestic and international markets and evaluated decisions of the monetary policy, expectation of inflation and pricing behavior of CBT’s and other central banks. In an effort to maximum benefit from the cost advantage in liquidity management, the Bank adopted an approach of effectively utilizing alternative markets and CBT’s and other central banks’ monetary policies. In 2018, CBT’s and other central banks’ monetary policies, international developments and interest rate expectations will continue to be the primary determinants of VakıfBank’s liquidity management strategy. »» EFFECTIVE SECURITIES PORTFOLIO MANAGEMENT VakıfBank created a dynamic structure in securities portfolio management that jointly set by domestic market conditions, international developments, and pricing behaviors. As main purpose is that the securities portfolio was structured according to yields, maturities and asset types based on the Bank’s budget targets and prevailing market conditions. In addition, long-term borrowing transactions in Turkish Lira were realized through swap transactions in the international markets. In 2018, after evaluating the market conditions, the Bank will consider both Turkish Lira and foreign currency long-term funding transactions through swap transactions, and maintain the current dynamic management structure of its securities portfolio. Also, the Bank will continue to remain steadfast to effective risk management rules within a balanced approach; and increase the Bank’s trading income through capital markets trading and foreign exchange transactions. In 2018, CBT’s and other central banks’ monetary policies, international developments and interest rate expectations will continue to be the primary determinants of VakıfBank’s liquidity management strategy.