Central Bank lowers required reserves for FX-protected accounts

ANKARA

The Central Bank has changed reserve requirement ratios in a move that aims to encourage shift to Turkish Lira deposits.

The reserve requirement ratios for FX-protected accounts with maturities up to six months will be reduced from 30 percent to 25 percent, the bank announced on Jan. 30.

The additional reserve requirement ratio for FX-denominated deposits/participation funds maintained in Turkish liras will be increased from 4 percent to 8 percent, according to the bank.

“With these arrangements, the steps towards the transition to Turkish lira deposits are strengthened, while the quantitative tightening process continues,” the bank said in a statement on its website.

The bank recalled that the Monetary Policy Committee (MPC) stated in its decision on Jan. 25 that in line with the simplification process, the committee will strengthen the monetary transmission mechanism in the face of any potential excess volatility in credit supply and deposit rates through macroprudential policy.

The committee also announced that in addition to policy rate decisions, it will continue to implement quantitative tightening in order to support the monetary tightening process, the bank added.

At its MPC meeting on Jan. 25, the bank raises the policy rate - the one-week repo auction rate - from 42.5 percent to 45 percent.

In addition to policy rate decisions, the committee will continue to implement quantitative tightening by extending the sterilization tools at its disposal in order to support the monetary tightening process, the bank said in the statement issued after the rate decision.

FX-protected deposit accounts, known as KKM, have been declining since the bank decided to roll back the KKM scheme in August last year.