Rates changed: 'Currency-Protected Deposit' decision from the Central Bank

The Central Bank's Communiqué on Amendments to the Communiqué on Reserve Requirements has been published in the Official Gazette.

Accordingly, the reserve requirement ratio for Currency-Protected Deposits (KKM) has been increased, and an additional TL-denominated reserve requirement ratio has been introduced for foreign currency deposits. Thus, the excess TL liquidity in the market will continue to be withdrawn from the system through the increase in reserve requirement ratios. At the same time, the transition from KKM to TL deposits will be encouraged.

INCREASED FROM 25 PERCENT TO 30 PERCENT

According to the communiqué, the reserve requirement ratio for maturities of up to 6 months, where KKM is concentrated, has been increased by 5 points to 30 percent. The reserve requirement ratio for maturities of up to 1 year and for maturities of 1 year or longer has been increased from 5 percent to 10 percent.

In September, the CBRT had increased the reserve requirement ratio for maturities of up to 6 months, where KKM is concentrated, from 15 percent to 25 percent, and had set the reserve requirement ratio for maturities of up to 1 year and for maturities of 1 year or longer at 5 percent.

4 PERCENT TL-DENOMINATED RESERVE REQUIREMENT INTRODUCED FOR FOREIGN CURRENCY DEPOSITS

Reserve requirement ratios for foreign currency deposits/participation funds have been increased by 1 point each across all maturities.

In order to withdraw the excess TL liquidity in the market from the system and to support the transition to TL deposits, it has been decided to apply an additional 4 percent reserve requirement on foreign currency deposits across all maturities, to be maintained in TL.

RESERVE REQUIREMENT EXEMPTION FOR INVESTMENTS FROM ABROAD EXTENDED

In order to encourage investments from abroad, the duration of the reserve requirement exemption for these resources has been extended from December 31, 2023, to the end of 2024.

In line with the changes made to the securities regulation as part of the simplification steps, the practice of maintaining a 20 percent reserve requirement for commercial loans extended by financing companies has been terminated.

The CBRT had shared with the public, through the decision of the Monetary Policy Committee dated October 26, 2023, that the monetary transmission mechanism would continue to be strengthened with additional steps aimed at increasing the share of TL deposits, and that it would continue to take selective credit and quantitative tightening decisions to support the monetary tightening process in addition to interest rate hikes.

Following this, the CBRT had introduced operational conveniences regarding export loans and firms' access to credit within the scope of simplification, along with steps to increase the TL share in the banking system.

The practice of maintaining 30 percent in securities for loans extended by banks to facilitate firms' access to credit, as well as the invoice-based loan practice, had been terminated.

The practice of maintaining securities based on the interest rates applied by banks on TL commercial loans above 1.8 times the reference rate had been abolished. In line with data showing that transitions to TL are accelerating, the TL share increase target for individuals, which was previously raised from 2 percent to 2.5 percent monthly, had been increased to 3.5 percent monthly.

The TL share increase target, which aims to increase the share of standard TL deposits within total deposits, was removed from the securities practice and added to the practice of charging commissions on reserve requirements maintained by banks for foreign currency deposits.