The Central Bank of the Republic of Turkey (CBRT) will apply required reserve and commission incentives to the amounts converted from foreign currency deposit and foreign currency participation fund accounts to TRY time deposit and participation accounts. The central bank will receive an annual commission of 1.5% over the foreign currency reserve requirements that banks have to hold.
· According to the letter sent to the banks by the CBRT, the amount converted from foreign currency deposit accounts and foreign currency participation fund accounts to time deposits and participation accounts is doubled by multiplying by the highest required reserve ratio (8%) applied in Turkey. The central bank will pay a higher interest of 14% (one-week repo rate) to a portion of the reserve requirement related to foreign currency-to-lira deposits.
· In order to support financial stability by increasing the share of Turkish Lira in total deposit/participation funds in the banking system, real persons residing in Turkey and holding a foreign currency deposit account in dollars on 20 December 2021, a participation fund in euro and sterling or in foreign currency, the said accounts can be opened over time deposits. It was reminded that if they switch to a Turkish lira deposit/participation account, they can benefit from the support provided by the CBRT, and the amounts converted to timed Turkish lira deposit and participation accounts will be exempted from the reserve requirement obligation.
· Banks that convert 10% of their foreign currency deposits until 21 January 2022 and 20% until 18 March 2022 will be exempt from the new commission until the end of 2022.
· It has been decided to calculate the said commissions over the average balances for the reserve requirement period, to accrue quarterly in March, June, September and December, and to be collected on the first business day.
· The amount converted from foreign currency to lira will be exempted from required reserves.
· The said changes will be effective as of the responsibility period dated 24 December 2021, which will begin its installation on 7 January 2022.
In summary; TRY, to which high interest will be paid, will be deducted with *2, while RR will not be charged from banks for deposit liabilities converted from foreign currency to TRY. More importantly, the Central Bank will receive a commission of 1.5% from the RRs held in exchange for foreign currency. Simply; While keeping foreign currency deposits is made more costly for banks, it is demanded that the weight be created on the TRY deposit side. In this context, it may be possible for banks to direct their customers to more TRY deposits and to apply the costs and advantages arising from the RR incentives to their account principles. In the transition to the currency-protected TRY deposit type, it is desired to ensure that foreign currency deposits are subject to an invoice within the scope of a kind of RR application, and as a result, banks encourage the transition to TRY-type deposits in order to bear costs such as interest or commissions less.
Savers need developments that will make holding TRY attractive in the transition to a new type of deposit. In this context, there is a risk that the exchange rate will increase low or not increase in an inorganic way, but the inflation remains high in this period, resulting in a negative TRY return. Considering the factors such as inflation will be above 30% in the coming months, the Central Bank’s policy rate will not increase and the exchange rate’s movement band is limited, savers should not be exposed to a cyclical lock-up. We think that inflation and interest rates will be the main determinants in shaping the expectations and preferences of the market, and that depositors’ tendencies towards deposit products will be determined. For this reason, it is necessary to monitor not only the deposit movements as of December 20, but also the broad-based deposit movements within the impact of the new product results and the new conditions regarding exchange rates. Our main criteria should not be a decrease in foreign currency deposits or an increase in TRY deposits alone, but the data showing the concomitant FX-TRY transition and the continuation of the increase in total deposits.
Hibya Haber Ajansı