FX-protected deposits down by 782 billion liras since August

ISTANBUL

FX-protected deposits declined by 781.6 billion Turkish Liras ($26.2 billion) since mid-August last year to end 2023 at 2.63 trillion liras.

Those deposits, which stood at 1.37 billion liras at the start of 2023, peaked at 3.4 trillion liras as of Aug. 18 last year and started to decline in the following weeks.

FX-protected deposit scheme, known as KKM, was introduced in December 2021 to boost the local currency. The authorities announced a series of measures from the start of 2023 until August last year to make the scheme attractive to depositors.

In August, the Central Bank started to roll back the FX-protected deposit scheme as part of the move by the new economic management team, which was installed after the May elections, toward more orthodox policies.

The Central Bank first lifted targets applied to banks for levels of conversions of foreign-exchange deposits to FX-protected deposits. Other moves designed to reduce FX-protected deposits followed.

“The year 2024 will be a year the foreign exchange protected system ends,” Finance Minister Mehmet Şimşek wrote on the social media platform X on Dec. 31, 2023.

According to a directive the Central Bank sent to local lenders at the end of last year, banks will no longer offer FX-protected lira deposit accounts for savings held in regular lira accounts from Jan. 1. But banks will continue to offer FX-protected accounts for FX deposits.

In its annual monetary policy document unveiled on Dec. 29 last year, the Central Bank said that it aims to increase the share of Turkish lira deposits to 50 percent in the banking system and to sustain the fall in the KKM balance in 2024 through steps prioritizing the lira deposits.