Turkish funds face losses due to new public bank regulation

Aysel Alp ANKARA / Hürriyet

The unemployment and disaster funds have been affected by the rate drop.

A newly imposed regulation obligating the unemployment and catastrophe insurance funds to deposit their savings in state banks has resulted in millions of Turkish Liras in losses for citizens due to a drop in interest rates in the absence of competition, sector sources have said.

The change made in the Public Treasury Communique in January obligated the Unemployment Insurance Fund and the Natural Disaster Insurance Institution (DASK) to only keep their respective 7 billion-lira and 2.5 billion-lira deposits in three state-run banks.

Before the amendment, the two funds’ deposits used to be held in whichever of Turkey’s 10 largest banks was paying the highest interest rate. As the lenders were competing to attract these two giant funds, the interest rates climbed even above market levels, raising premium payers’ gains.

However, banking sector sources have accused public banks that won the right to hold the two funds’ deposits, Halkbank, Ziraat Bank and Vakıfbank, of allying to offer the lowest interest rate, which means around a two-point interest decline each year.

A fall of around two points results in a loss of 140 million liras for the Unemployment Insurance Fund and 50 million liras less for the DASK fund.

Bankers argue that the amendment is aimed at recovering reserved requirement ratios of state-owned lenders and empowering them to provide more loans. Therefore, the new scheme serves the three public banks’ profitability, even as the value of the unemployment fund, which is formed by deductions from millions of employees’ wages, and natural disaster fund decline.