New move from the Central Bank! Increase in reserve requirement interest rates

The Central Bank of the Republic of Turkey (TCMB) has made a significant change to its reserve requirement practice. According to the implementation instructions sent to banks, the interest paid on reserve requirements will no longer be calculated based on the policy rate, but rather on the weighted average funding rate.

FUNDING RATE TO SERVE AS REFERENCE

With this regulation, the interest payments on reserve requirements, which were previously based on the policy rate, will now be based on the average interest level of the funding provided by the Central Bank to the market.

Currently, the Central Bank's policy rate stands at 46 percent. However, following the latest Monetary Policy Committee (PPK) meeting, the weighted average funding rate has been hovering near 49 percent, which is the upper band of the interest rate corridor.

With this change, the interest income banks earn on their reserve requirement accounts will increase by approximately three percentage points. In other words, banks will earn higher interest income on the reserve requirements they hold at the Central Bank.

WHAT DOES THIS MEAN FOR BANKS AND MARKETS?

According to analysts, this regulation may have a mitigating effect on deposit costs, albeit a limited one. It is also considered a factor that supports the Turkish Lira. Experts emphasize that this step is a positive development for the banking sector.

REGULATION MAY EASE BANK COSTS

The Central Bank of Turkey's shift to the weighted average funding rate for reserve requirement interest provides additional returns to banks and may slightly ease deposit competition. Through this, the aim is to both alleviate pressures on the Turkish Lira and strengthen the financial structures of banks. In the coming period, the reflection of this regulation on deposit and loan interest rates will also be closely monitored.