1. Cross-Currency Swaps in the Turkish Banking System
Engin YILMAZ
2017

2. Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System
CCS
Cross currency swap can be described as change of notional currencies (principals) and interest payments in contract for a certain time period.
Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System

3. Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System
CCS
is used
Most discussions on swaps start with some analysis of the so-called comparative advantage argument
One counterparty has a relative advantage borrowing on, say, a fixed rate basis and another has a relative advantage borrowing on a floating rate basis.
Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System

4. Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System
CCS
is used
This comparative advantage argument may very well have been the motivating factor behind the genesis of the swaps market over 30 years ago but doesn’t play a huge role today
Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System

5. Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System
CCS
is used
Cross currency swap is used by national and international banks for hedging, speculation and balance sheet management.
Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System

6. Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System
CCS is
If principals are in the same currency and only interest payments are exchanged, this swap is called as interest rate swap.
If principals are in the different currencies and principals are exchanged, this swap is called as currency swap.
If principals are in the different currencies, interest payments and principals are exchanged , this swap is called as cross currency swap.
Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System

7. Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System
Principal
Interest Payment
Same Currency
Interest Rate Swap - +
Currency Swap
Cross Currency Swap
CCS is
Foreign exchange swaps : Transactions involving the actual exchange of two currencies (principal amount only) on a specific date at a rate agreed at the time of the conclusion of the contract and a reverse exchange of the same two currencies at a date further in the future at a rate agreed at the time of the contract. B I S
Currency swaps : Contracts which commit two counterparties to exchange streams of interest payments in different currencies for an agreed period of time and/or to exchange principal amounts in different currencies at a pre-agreed exchange rate at maturity.
Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System

8. Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System
Literature on
CCS
A few study,
Focus on swap spread boom in global crisis,
Dollar borrowing in the international markets
Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System

9. Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System
Literature on
CCS
Mak (2009)
Ryden et al. (2012)
Blavarg (2013)
Riksbank(2013)
Hilander (2014)
Molland (2014)
Stacey et al. (2013)
Duran and Küçüksaraç (2012)
Şimşek (2015)
Keleş (2016)
Balance Sheet Management
Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System

10. Turkish Banking System
Loans – Deposits Gap
Detailed Loans – Deposits Gap
Source: Banking Regulation and Supervision Agency Statistics (BRSA), Turkey, December 2016
Source: Banking Regulation and Supervision Agency Statistics (BRSA), Turkey, December 2016
Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System

11. Turkish Banking System
Assets | Liabilities
FX - TRY
TRY (A) - TRY (L) = FX (L) – FX (A)
Source: Banking Regulation and Supervision Agency Statistics (BRSA), Turkey, December 2016
Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System

12. Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System
Open Position
Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System

13. Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System
There is no
Open Position
Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System

14. Turkish Banking System
TRY Assets - TRY Liabilities Gap
TRY Gap / TRY Assets
Source: Banking Regulation and Supervision Agency Statistics (BRSA), Turkey, December 2016
Source: Banking Regulation and Supervision Agency Statistics (BRSA), Turkey, December 2016
Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System

15. Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System
Derivatives
in Turkey
Derivative Financial Instruments
(Million TRY) %
Forward FX Transactions
8,5
Money Swaps
49,3
Interest Rate Swaps
25,6
Other Derivatives
16,6
Source: Banking Regulation and Supervision Agency Statistics (BRSA), Turkey, December 2016
Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System

16. Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System
Money Swaps
in Turkey
Total Foreign Exchange Assets
,43
Total Foreign Exchange Liabilities
,24
-4.359,82
Balance Sheet - Total Assets FX (million TL)
,75
Balance Sheet - Total Liabilities FX (million TL)
,06
,31
Off Balance Sheet Accounts (FX Asset) (million TL)
,39
Off Balance Sheet Accounts (FX Liability) (million TL)
,19
70.699,20
Source: Banking Regulation and Supervision Agency Statistics (BRSA), Turkey, December 2016
Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System

17. Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System
Thanks !
Engin YILMAZ | Cross-Currency Swaps in the Turkish Banking System