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INTRODUCTION
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REVIEW OF OPERATIONS
IN 2014
TREASURY MANAGEMENT
Global economic activity has slowed since first quarter
2014. Inflation rates remained subdued thanks to rapidly
falling commodity prices led by a precipitous decline in oil
prices. There has been a major decoupling between the
growth performance of the United States and other major
economies. Economic growth in the Eurozone and Japan
weakened and emerging markets including China lost
their high growth rates while the US economy staged a
powerful recovery.
The differences in growth prospects of the major
economies were also reflected in their monetary policy
measures. Following the Fed’s decision to taper off its
asset purchase program in October, the markets expect
the Fed to start a series of interest rate hikes in mid-
2015. On the other hand, the ECB and the BOJ, along with
the Central Bank of the Republic of China, are expected
to loosen their monetary policies and take new steps
to revive economic growth. These differences between
economies may ultimately affect the normalization
process of the Fed’s monetary policy.
Turning to the developments in the Turkish economy
in 2014, global financial fluctuations impacted Turkey
in similar ways to other developing countries. The CBT
embarked upon a process of monetary tightening in first
quarter 2014, but then began to make moderate cuts
in policy interest rates as domestic and international
uncertainties diminished after the second quarter. In the
last quarter of the year, the CBT began pursuing firm
liquidity policies in the face of increasing geopolitical
16.1%
Savings deposits rose
to TL 36.4 billion as of
end-2014, up 16.1% on
the previous year.
risks and financial uncertainties. Demand-side pressures
continued despite declining energy prices; as a result, the
foreign exchange rate as well as food prices rose above
the inflation target. In an effort to support the banking
sector, CBT began making partial interest payments on the
Turkish lira-denominated required reserves.
Slowing growth in European countries, Turkey’s largest
export market, combined with weakening international
demand following geopolitical developments in
neighboring countries, slowed the growth pace of exports.
However, falling commodity prices, the precipitous decline
in oil prices in particular, helped the current account deficit
by reducing total imports. Macroeconomic measures
put in place by the administration brought credit growth
under control and slowed household borrowing. In spite
of the fluctuations in global financial markets, the Turkish
banking industry continued to raise non-deposit funding
and foreign capital at an increasing rate, indicating the
strength and reliability of the banks in the sector.
AN EFFECTIVE LIQUIDITY MANAGEMENT PROGRAM
CARRIED OUT IN LIGHT OF PROFITABILITY AND
PRUDENCE PRINCIPLES
Taking into consideration the elements of the policies
undertaken by the CBT within the profitability and
prudence principles, the Bank has implemented a dynamic
liquidity management program that actively utilized
the reserve option mechanism. The Bank’s liquidity
management strategy in 2015 will be driven primarily by
CBT policies as well as by interest rate expectations.
Maintaining a solid deposit base in 2014, VakıfBank expanded its
total deposits by 12.54% YoY, to TL 91.8 billion.