what does balance sheet of central bank w deeply unconventional approach to financial globalisation look like?

@CentralBank_TR Turkey: no capital controls/interest rates to contain non/resident outflows, instead burn fx reserves and failing to contain TRY depreciation 1/n ImageImage
asset side looks familiar to students of EM:

the action in foreign assets, while traditional business of central banks - issuing reserves to banking system - around 15% of assets, and outright ownership of TRY sovvies negligible Image
the 'Foreign Assets' rubric is a big black box:

other EM cbs typically report Net Foreign Assets so things like cb fx swaps are accounted but clearly not here

any EM central bank w large fx reserves would accumulate them by purchasing USD/EUR from local exporters/banks (large capital inflows) & pay in local cb reserves or base money

so it's liabilities side would have either bank reserves or sterilization instruments

not Turkey cb Image
Turkey's cb borrows USD/EUR from banks, state and non-residents (unclear if official like Emirates or private).

quite remarkable how much of TRY defence effort is conducted with local banks' fx reserves (and how vulnerable to residents withdrawing deposits CBRT is)
if @Brad_Setser were active here he'd clarify mystery of negative open market operations (OMOs) position

really struggling to get my head around negative central bank liability - is it accounting for CBRT's fx swaps?

but why negative if on asset side it increases fx reserves? Image
OMOs typically conducted to adjust supply of bank reserve:

- repo loan increases reserves
- sterilizations of fx interventions trigger adjustments on liabilities side: lower reserves account, increase reverse repo/cb debt, certificate of deposits etc

but negative OMOs???
you'll say accounting tricks, but every accounting trick needs some conceptual reasoning behind, and I cannot imagine how I'd explain negative liabilities to my students

a promise to pay that is actually promise to receive but not an asset? one for @i_aldasoro & BIS colleagues
also, how do counterparties to those negative OMOs record them on their balance balance sheet?
a negative asset?
of course, balance sheets alone wont tell you much about daily fx management strategy - but it does tell us something about structural vulnerabilities (and crazy accounting)

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More from @DanielaGabor

Mar 16
kind of incredible, but US Fed's emergency lending to US banks was higher over the past week than during the global financial crisis/Lehman moment in 2008
this is the discount window lending, there are several other - much smaller - ones, including, it turns out, the par value collateral BTFP
the Fed also changed the discount window - zero haircuts for collateral also eligible at BTFP, but didnt shift to par value (so better terms still at BTFP)
Read 5 tweets
Mar 15
wonder what exactly is SNB promising in terms of liquidity support to #CrediSuisse additional to the standard discount window
this is a weak statemnt - Credit Suisse already has access to SNB emergency liquidity via discount window Image
SNB discount window is very short-term - either intraday or overnight, at 10% haircut on collateral posted and a surcharge Image
Read 6 tweets
Mar 14
when you go from protesting the bailout of tech bros to the German conservative position on sovereign debt in the next paragraph. Image
amazing how Sheila Bair, of all, would miss the macrofinancial aspects of the SVB affair, they're all gonna fall for the 'moral hazard for techbros' argument

a reminder that for years, conservative German voices fought hard at Basel and in European regulatory spaces to remove the risk-free treatment of sovereign debt in regulatory regimes.
their logic? periphery sovereigns should have all possible backstops removed.
Read 7 tweets
Mar 14
I'm on strike Thursday but can someone ask Mme @Lagarde if the ECB is prepared to follow the US Federal Reserve in extending par value collateral support to European banks in SVB scenario?

and then, of course, the exciting implications of that - is the ECB prepared to extend par value collateral for Italian banks pledging Italian sovereign bonds? German banks pledging Green sovereigns?
we're not going to see Macron/the Dutch complaining about a collateral subsidies race as they did about US IRA, but remember, every concession to US banks can be weaponised by European banks a la 'European regulators are so fond of sticks'

Read 4 tweets
Mar 13
outside the drama of US central banking, we in UK continue to live in Marie Antoinette times
the upside of poolgate is that Tories will throw other Tories under the bus for optics

a reminder half of UK workers will be on strike Wednesday the 15th just to try and make up a bit for the massive loss in living standards the Tories have inflicted upon us for the past 10 years.
Read 4 tweets

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