The Central Bank of the Republic of Turkiye introduces new regulations to strengthen the monetary transmission mechanism and support TL deposits.
CBRT Introduces New Measures to Strengthen Turkish Lira Deposits
The Central Bank of the Republic of Turkiye (CBRT) has announced a series of new measures aimed at bolstering Turkish Lira (TL) deposits as part of its ongoing efforts to support the monetary transmission mechanism. These adjustments in reserve requirements are a strategic move to encourage banks to increase their TL deposit shares and ensure a stable financial environment.
Key Changes in Reserve Requirements
The CBRT’s recent changes include adjustments in the reserve requirement application. Specifically, for banks where the real person TL deposit share ranges between 45% and 50%, the monthly growth target has been raised to 0.8 percentage points. This move is designed to incentivize banks to enhance their TL deposit levels, reinforcing the central bank’s commitment to stabilizing the Turkish Lira.
For banks exceeding a 60% share of real person TL deposits, the monthly growth target has been removed, with a new condition imposed to maintain the TL deposit share above 60%. This policy adjustment reflects the CBRT’s strategy to maintain high levels of TL deposits within the banking sector, ensuring a robust monetary foundation.
Inclusion of Corporate Deposits in KKM Conversion
Another significant update from the CBRT is the inclusion of corporate deposits in the calculation of the total target for the transition and renewal of Kur Korumalı Mevduat (KKM) to TL. By integrating corporate accounts into the KKM calculation, the CBRT is broadening the scope of its monetary policies, aiming to stabilize and enhance the appeal of TL-denominated deposits.
Moreover, the interest rate cap applied to the required reserve amount for TL deposits, based on the TL conversion rate, has been increased to 84% of the policy interest rate. This increase is a critical component of the CBRT’s strategy to boost TL reserves, offering more attractive conditions for banks to hold TL deposits.
Increased Blocked Reserve Ratio
In a further step to fortify the monetary transmission mechanism, the CBRT has also raised the blocked reserve ratio for TL mandatory reserves by 5 percentage points. This adjustment serves as an additional measure to ensure that banks maintain a strong TL reserve base, contributing to the overall stability of the Turkish financial system.
The CBRT has reiterated its commitment to supporting TL deposits through these measures. The central bank has also indicated that it is prepared to take additional steps if necessary, highlighting the dynamic nature of its monetary policy approach.
The CBRT’s latest measures to enhance Turkish Lira deposits underscore its proactive approach to maintaining financial stability in Turkiye. By adjusting reserve requirements and implementing targeted incentives, the central bank is taking decisive action to support the Turkish Lira and ensure the effectiveness of the monetary transmission mechanism. As these measures take effect, the Turkish banking sector is expected to see strengthened TL deposit levels, contributing to broader economic stability.
Source: Trthaber / Prepared by Irem Yildiz