Türkiye’s central bank announced on Friday fresh steps in line with its goals to boost de-dollarization and keep down Turkish lira government bond yields.
The Central Bank of the Republic of Türkiye (CBRT) has raised the ratio of securities that banks must maintain if their lira deposits amount to between 50% and 60% of their total deposits to seven percentage points from two points, according to an announcement in the country's Official Gazette.
The central bank had been indicating recently that it may further strengthen its macroprudential policy set, given the persistent demand for hard currency and some pick up in both bond and loan yields, Tera Yatırım said in a note.
The lira has been weakening slightly against the dollar recently, having been stable in recent months. It was steady at 19.2580 on Friday morning, having weakened from 18.7195 at the end of last year.
The currency lost some 30% of its value against the dollar last year and 44% in 2021.
The central bank also said an additional 5% reserve requirement would be applied on forex deposits for banks with a lira share of less than 60% in total deposits.
The bank re-introduced forex-to-lira deposit conversion targets, requiring banks to maintain various amounts of securities based on multiple conversion targets on various dates.
It also increased the discount rate of CPI-linked securities in the collateral pool to 80% from 70% in a move promoting fixed coupon bonds. The security maintenance requirement for loans extended at a rate 1.8x above the reference rate was increased to 150% from 90%.
Encouraging the use of local currency in bank deposits is a cornerstone of the central bank’s “liraization” strategy.
Unveiled last year, the strategy, which the bank says is its integrated policy framework, seeks to stabilize the national currency, which steep declines had pressured.
The data from the Banking Regulation and Supervision Agency (BDDK) showed that 59.2% of all bank deposits were held in the lira as of March 31.
In late 2021, Türkiye launched a government-backed scheme that safeguards lira deposits from depreciation.
The scheme, known by its acronym KKM, sought to keep dollarization at bay by encouraging people to keep their savings in lira through guarantees to compensate for losses from the decline of the national currency.
The volume of deposits under the scheme has exceeded TL 1.7 trillion in the week to March 31, marking a new record, according to the BDDK weekly data. It said the amount had increased by TL 28.2 billion in one week.
The increase follows a regulation that removed the scheme's maximum interest rate limit for domestic individual investors.
The regulation still stipulates that the interest rate offered to lira deposits as part of the scheme cannot be below the current policy rate of the CBRT, but the upper limit has been removed.
Last year, the central bank cut its benchmark one-week repo rate by 500 basis points to counter an economic slowdown and held it at 9% in December and January.
It trimmed it by another 50 basis points in February to boost industrial production and employment after devastating earthquakes. It left the key policy unchanged last month.
