Central Bank interest rate decision for KKM!

The Central Bank of the Republic of Turkey (CBRT) has taken another step to "reduce the appeal" of foreign exchange-protected deposit (KKM) accounts, which were introduced during the term of former Minister of Treasury and Finance Nurettin Nebati.

The CBRT's communiqués on the subject were published in the Official Gazette.

Accordingly, banks will be able to offer interest rates below the policy rate for foreign currency-converted protected accounts, but this rate cannot be lower than 85 percent of the 1-week repo auction rate, which is the policy rate. According to the Central Bank's plan, this will support standard Turkish Lira deposits while reducing the appeal of the interest paid on foreign currency-converted protected deposits (KKM).

Additionally, a technical change was made to the date requirement for conversion accounts held by individuals. Accordingly, domestic resident individuals will be able to convert their gold, dollar, euro, and British pound deposit and participation fund accounts existing in banks as of November 30, 2023, into Turkish Lira.

For foreign currency-converted protected deposit accounts where rates lower than the Central Bank's policy rate are applied, if the exchange rate difference is higher than the interest or profit share to be paid by the bank but lower than the amount calculated with the policy rate, the entire difference will be covered by the bank.

If the exchange rate difference is higher than the amount calculated with the policy rate, the portion of the support amount up to the amount calculated with the policy rate will be paid by the bank, and the portion exceeding it will be paid by the CBRT.