Central Bank rolls back FX reserve requirement ratios

ISTANBUL

The Turkish Central Bank has decided to increase foreign exchange reserve requirement ratios by 300 basis points in all liability types and maturity brackets for all banks.

The move was introduced “as part of the normalization process, in order to support financial stability,” the bank said in a statement on July 18.

“As a result of this decision, approximately $9.2 billion of FX and gold liquidity is expected to be withdrawn from the market,” said the bank.

In a bid to cushion the economic fallout from the coronavirus pandemic, the bank had reduced FX reserve requirement ratios by 500 basis points for banks that met real credit growth conditions on March 17, releasing $5.1 billion of liquidity.

On top of that, banks that met real credit growth conditions for the first time were provided with approximately $9.2 billion of liquidity, and thus, a total amount of $14.3 billion of liquidity was provided to the banking system.

Turkey ended weekend lockdowns and eased restrictions on businesses imposed to curb the spread of the coronavirus pandemic on June 1, aiming at increasing the economic activity that fell dramatically starting from mid-March.

The latest change will take effect from the calculation date of July 10 with the maintenance period starting on July 24, according to the statement.