Our History

In the Ottoman Empire, economic activities were carried out by various establishments such as the Treasury, the Mint, jewelers, foundations, bazaars and guilds. The main economic activities in this period were:

In this system that prevailed until the second half of the 19th century, the Ottoman Empire minted gold coins on behalf of the Sultan.

In the face of the financial problems triggered by domestic borrowing and wars, the Ottoman Empire printed banknotes (Kaime-i Nakdiye-i Mutebere) and put them into circulation in 1840.

During the Crimean War in 1854, the Ottoman Empire borrowed from other nations for the first time in its history. As it needed a state bank to assume an intermediary function in the repayment of these external debts, the Ottoman Bank (Bank-ı Osmanî) was established in 1856 with English capital and with its headquarter in London. The fundamental powers of the Bank were limited to lending in small amounts, making advance payments to the Government, and discounting certain Treasury bills.

In 1863, the Ottoman Bank was dissolved and restructured as an English-French partnership under the name Bank-ı Osmanî-i Şahane (Imperial Ottoman Bank), becoming a state bank. The Imperial Ottoman Bank was granted the sole privilege of issuing banknotes for a period of thirty years. The Bank, acting as the treasurer of the state, was assigned to collect state revenues, make payments on behalf of the Treasury and discount Treasury bills, as well as making interest and principal payments pertaining to domestic and foreign debts.

Over time, the fact that the capital of the Imperial Ottoman Bank belonged to other nations triggered reactions, which laid the foundation for the idea of a national central bank. Efforts towards establishing a central bank with domestic capital culminated in the establishment of the Ottoman National Credit Bank (Osmanlı İtibar-ı Millî Bankası) on 11 March 1917. However, the defeat of the Ottoman Empire in the First World War prevented the bank from becoming a national bank that would assume central bank functions.

After the First World War, deliberations about the establishment of a central bank in Türkiye gained pace in line with the global trend of nations to formulate their monetary policies independently by establishing their respective central banks with the authority to issue money, and the motive to reinforce the political independence gained in the War of Independence with economic independence. This issue was first addressed at the Izmir Economic Congress in 1923 with a special emphasis on founding a “national state bank”. In 1927, the draft bill on the establishment of a central bank, submitted by the Minister of Finance Abdülhalik Renda, was accepted. Türkiye exchanged views with central banks of other countries during the establishment stage of the Turkish Central Bank.

In 1928, Dr. G. Vissering, President of the Dutch Central Bank (De Nederlandsche Bank), was invited to Türkiye. In his report, he underlined the necessity for an independent central bank not affiliated to the Government. In 1929, the Italian expert Count Volpi also suggested that the establishment of a central bank was necessary to ensure stability of the Turkish currency. Following these developments, the Government took the initiative to draft the necessary legal framework for the establishment of a central bank, and a draft law was prepared with the contributions of Prof. Leon Morf from the University of Lausanne.

The law was enacted by the Grand National Assembly of Türkiye on 11 June 1930 and published on the Official Gazette of 30 June 1930 as the Law on the Central Bank of the Republic of Türkiye No. 1715.

Following the centralization of duties carried out by different institutions and organizations, the Central Bank of the Republic of Türkiye (CBRT) started to function on 3 October 1931. The Bank acquired a legal status as a joint stock company to demonstrate that it is not a public entity and that it is independent.

The Bank’s shares were divided into (A), (B), (C) and (D) classes:

• Class (A) shares belong solely to the Treasury (For the purpose of strengthening the Bank’s independence, it is stipulated in Law No. 1715 that these shares shall not constitute more than fifteen percent of the capital).
• Class (B) shares are allocated to national banks.
• Class (C) shares are allocated to banks other than national banks, and to privileged companies.
• Class (D) shares are allocated to Turkish businesses, and to legal and real persons of Turkish nationality.

According to Law No. 1715, the primary objective of the Central Bank was to support the economic development of the country. To this end, the Bank was authorized to:

• Set rediscount ratios, employing them as the main policy instrument,
• Regulate the money market and the circulation of money,
• Execute treasury operations,
• Take measures regarding the stability of the turkish currency,
• İssue banknotes exclusively,
• Act as the treasurer of the government.

In this period, the authority to determine the exchange rate under the fixed exchange rate regime rested with the Government.

The 1930s, when the Government could not intervene in the Bank’s realm of authority and decisions, were marked by Central Bank independence and low inflation levels.

During the1940s, which were dominated by the adverse effects of the Second World War, the Bank, like its peers all over the world, implemented policies to offset the public finance deficit rather than implementing an independent monetary policy. Therefore, the general price level increased more than threefold in the 1938-1948 period.

During the 1950s, growth and rapid development were financed by the Central Bank’s resources. These resources were rendered available to the public through short-term advances provided to the Treasury. An important development for the Central Bank in that period was the establishment of the Banknote Printing Plant in 1955, and accordingly Türkiye started printing banknotes as of 1957.

With the transition to a planned economy in the 1960s, the Bank pursued expansionary monetary policies and continued to provide resources to the public sector parallel to the economic conditions of the time and the requirements of industrial development. It was during this time that the majority of powers related to foreign exchange control were transferred to the CBRT.   

In order to adjust to the global changes that occurred in the aftermath of the Second World War and to enhance the effectiveness of the Central Bank, the Law on the Central Bank of the Republic of Türkiye No. 1211 was accepted on 14 January 1970. Thus, the CBRT, turning a new page in its history, was vested with a new structure reflecting, albeit partially, the novelties in the fields of economy and central banking of the time. 

Office of the Governor: With Law No.1211, the Office of the Governor was established to ensure equivalence in terms of international representation, foreign relations and protocol. Mr. Naim Talu became the first “Governor” to assume this title. 

Duties and Powers of the Central Bank: The new Central Bank Law also introduced significant changes to enhance the Bank’s duties and powers. These can be listed as follows: 

Additionally, the upper limit for short-term advances to the Treasury was increased by 15 percent of budget allocations pertaining to the respective year.

The 1980s saw important developments that might be described as a turning point for both the Turkish economy and the Central Bank. 

In 1983, the Bank was empowered to manage gold and foreign exchange reserves. In addition, it was incorporated into the Law that the Bank would carry out its fundamental duties in compliance with the basic requirements of the economy and with the objective of achieving price stability. The Bank started conducting open market operations in 1987 and became a pioneer in the establishment of money and foreign exchange markets in the modern sense. 

In 1989, with Decree No. 32 on the Protection of the Value of Turkish Currency, economic agents were allowed to conduct foreign exchange transactions, and having declared the Turkish currency “convertible”, a relatively more flexible exchange rate regime was adopted.

In 1990, for the first time, the Bank announced a monetary program which aimed to meet the liquidity need of the market without prejudice to the stability of exchange rates and interest rates. Although the targets announced in 1990 were achieved, the Gulf War in the following period significantly affected the Turkish economy. Problems such as the pressure on the financial sector, political instability, lax fiscal policy, and the fragile structure of the banking sector hindered achievement of macroeconomic stability and led to a financial crisis in the first quarter of 1994.

Initial regulations proposed to prevent the financing of public debts – a key element of the period of high inflation – by the Bank also coincide with this period. On 21 April 1994, limitations were imposed on the Treasury’s use of CBRT funds. Moreover, with a protocol signed between the Bank and the Treasury in 1997, it was concluded that the Treasury would not get short-term advances from the CBRT from 1998 onwards.

* Devaluation: Lowering of the exchange value of a country’s currency with a Government decision. Practiced generally in countries that have a fixed exchange rate system and a balance of payments deficit.

In the 1995-1999 period, the CBRT followed policies geared towards ensuring stability in the financial markets. As inflation could not be brought under control, a new exchange rate-based stability program was adopted in 2000. However, amid the aggravated loss of confidence in the economy that emerged towards the end of 2000 and the crisis that broke out in 2001, this program ceased to be implemented. Consequently, the free floating exchange rate regime was adopted on 22 February 2001.

In line with the structural transformation in the Turkish economy after the crisis, significant amendments were made to the CBRT Law on 25 April 2001. These amendments are as follows: