Gov’t plans to transfer Central Bank reserve funds to budget

ANKARA

The Finance and Treasury Ministry is working on a regulation that would allow the transfer of the Central Bank’s reserve funds kept in Turkish Liras to the budget, state-run Anadolu Agency has reported.

Economy officials in Ankara told the agency that the planned regulation foresees changes to article 60 of the Central Bank Law and that the regulations will be submitted to parliament for approval.

According to the sources, the new regulation will remove a provision in the respective article which stipulates that 20 percent of the annual net profit of the Central Bank “should be allocated to the reserve fund.”

If parliament approves the proposed change, the Central Bank’s profit will be distributed in the following order:

“Six percent of the nominal value of its share capital to the shareholders as the first dividend. After deducting this six percent, a maximum of five percent of the remaining amount to the staff members of the bank in an amount not to exceed the sum of two months of their salaries and 10 percent to the extraordinary reserve fund. A second dividend to the shareholders in the ratio of a maximum of 6 percent of the nominal value of its share capital by a decision of the General Assembly. And the balance will be transferred to the Treasury after this allocation.”

The planned regulation foresees that accumulated reserve funds shall be added to the bank’s profit to be distributed -except for the reserve funds from the last year’s profit.

The sources said that the proposed regulation aligns the issue of reserve funds with the Turkish Commercial Code.

Turkey’s Central Bank posted a net profit of nearly 56.3 billion Turkish Liras ($9.76 billion) in 2018.

They also noted that there are similar practices in other countries.

In Canada, the whole of the central bank’s profit is distributed. In Poland less than 98 percent of the profit is distributed, while the corresponding figure is 90 percent for South Africa’s central bank.

In Russia and Peru, 50 percent and 25 percent of the central bank profit could be distributed.