Hafize Gaye Erkan, 44, an accomplished banker with an exceptional impact in the U.S. banking industry, has taken up perhaps one of the most difficult jobs in the world. Albeit a job whose demands may result in a clash in her convictions with those of the expectations of the number one citizen of her home country, Turkey.
On June 8, 2023, President Recep Erdogan appointed Erkan as Turkey’s Central Bank Governor, tasked with revitalising the country’s weakened economy and aiming to restore its former prosperity when the Lira equaled the US dollar.
A Ph.D. holder in financial engineering from the prestigious Princeton University, the exceptionally brilliant Erkan takes over a job that has had seven governors in two decades before her and whose institutional independence often clashed with the unorthodox monetary policy of a tight-fisted president.
“Keep interest low” are some of the words of President Erdogan that “echoed” on the pages of several international media publications.
Turkey brings to mind a similar West African country, Nigeria, regarded as the biggest economy in Africa but facing a record high inflation rate, a high unemployment rate, and several other macroeconomic challenges.
However, unlike Nigeria, Turkey has decided to follow an unconventional path to fighting inflation, which is to keep the interest rate artificially low. President Erdogan believes that if rates are kept low, this will encourage borrowing, which will in turn spur production and growth. A philosophy that has proved unsuccessful with a devastating impact.
This unusually high cost of living has affected everybody and every institution to the point where Erkan, who assumed office in June, has been unable to find a home for herself and her family.
In an interview with a Turkish newspaper in November, Erkan revealed that due to financial constraints, she and her family couldn’t afford a home in Istanbul, prompting them to relocate and live with her parents.
Her condition and that of millions of Turks reflect the dire economic situation of a country whose inflation rate rose to its highest this year. According to Eurostat, inflation in Turkey for November was 62 percent.
A July 2020 report from Borgen Project, an NGO devoted to fighting hunger and poverty around the world, revealed that despite a lack of reliable data, roughly 150,000 people were homeless in Istanbul, the capital city. A number that should have sprung up since that report was last posted.
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Who is Hafize Gaye Erkan, and what makes her so special?
Hafize Gaye Erkan, born in Istanbul, Turkey, in 1979, grew up under the guidance of her father, who was an engineer, and a mother who taught physics and mathematics at colleges.
Erkan’s love for quantitative reasoning and the sciences was inculcated in her through her parent’s love of interest in all things STEM (science, technology, engineering).
Erkan’s foray into coding, sparked by her mother’s insight, began with Turkish coffee exchanges for lessons in C++.
This early foundation, emphasising the value of learning how to learn, steered her to pursue excellence.
Excelling in her studies, Erkan landed at Princeton University as a Gordon Y.S. Wu Fellowship recipient, ultimately leading to a Ph.D. in Operations Research and Financial Engineering.
Erkan’s quantitative mindset and tenacity fueled her professional success. At Goldman Sachs, she created groundbreaking financial models and risk management strategies.
Her path to First Republic Bank was paved by Jim Herbert, impressed by her intellect and work ethic. Joining the bank in 2014, she rapidly ascended, becoming president in 2017, driving innovation and reinforcing the bank’s client-centric approach.
Throughout, Erkan’s core values, instilled by her parents, shaped her leadership: honesty, hard work, and humility.
Her dual priorities at the bank are clear: safeguard the institution while nurturing a happy and empowered workforce.
Since joining the Board of Directors in 2019, Erkan has extended her impact beyond the bank, contributing to educational initiatives and serving on various boards. Her journey, fueled by a deep-rooted character, mirrors her commitment to excellence, innovation, and service.
Unfortunately, Erkan’s time at First Republic was short-lived, as boardroom disagreements and other reasons forced her to resign.
“It was a difficult decision,” she said on Bloomberg Television. “It was time for a change.”
Challenges that Erkan must overcome as the country’s chief banker
Erkan will have to overcome a mountain of challenges to help revive the Turkish economy and restore confidence in the lira, Turkey’s currency.
The former Goldman Sachs banker will have to collapse President Erdoğan’s unorthodox economic policies. Policies that have raised concerns among investors and are impacting Turkey’s balance sheet negatively.
The most important of all is to shift from Erdogan’s strong views against interest rate rises, something he considers the “mother and father of all evil,” contrary to traditional economic strategies.
Secondly, to drive an inflow of capital from abroad, Erkan will have to raise interest rates. This action, according to orthodox economic theories, will not only attract capital inflow but also serve as a strong weapon in the fight against inflation.
Her predecessor, Şahap Kavcıoglu, significantly slashed interest rates from 19 percent to 8.5 percent within two years. This drastic decision fueled a severe inflation crisis and put pressure on the lira, depleting foreign currency reserves by approximately $25 billion.
Thirdly, there is a lack of independence for the Central Bank. President Erdogan is known to interfere in the mission statement and operations of the bank, a situation that may bring back bad memories of her time at First Republic Bank, where her stay was short-lived and toxic because of her frequent clashes with some members of the board.
In a report by a journalist, Stefanie Glinski said that the Turkish central bank’s independence has been questioned due to past purges, management issues, and a drive by Erdoğan to centralise power, which has negatively impacted its ability to implement conventional economic policies.
“Erkan will need to rebuild the [central bank] after years of mismanagement, purges, and demotions.’ Like most other key institutions, [the bank] has lost its independence and has been hollowed out by Erdoğan’s drive to centralise power.” Wolfango Piccoli, Teneo Consultancy.
These challenges in Turkey’s economic landscape will pose significant hurdles for Erkan as she takes on the role of chief banker, navigating between conventional economic strategies and the president’s unconventional policy preferences.
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Some memorable quotes from Erkan
“In return for me making them Turkish coffee, they taught me C++ and the joy of recursive functions.”
“Data is indisputable. Any position can be bolstered by the power of numbers.”
“Mastering a topic builds confidence to embrace and explore the unknown and venture into uncharted territory.
“That’s where opportunity lies, in identifying clear answers and innovative solutions that never existed.” She said this when she was awarded a National Science Foundation grant for her thesis, “Decentralized Risk Management for Global Companies.”
“I observed Jim and Katherine over those two years—how much energy they have for what they do, how much passion they have. They’re very creative and entrepreneurial. And they care for people,” reflected Erkan when she was considering the job at First Republic Bank.
After attending the Advanced Management Program at Harvard, Erkan returned to her office to find three plaques from Herbert on her desk: Work Hard, Stay Humble, Culture Wins, and Make It Happen.
They reminded her of her parents’ expectation that she live by the “three H” values: Honesty, Hard work and Humility. Erkan thought, “This is meant to be. This is the place where I am supposed to be.”
“As I look at it, I have two jobs. One, keep the bank safe and sound at all times—credit, capital, liquidity—as has always been the mantra of the bank. And two, keep our people happy and empowered. Those happy colleagues will lead to more happy clients,” said Erkan.
