Turkish cenbank raises securities maintenance ratio for forex deposits

The Turkish Central Bank said on Tuesday it raised the securities maintenance ratio required for foreign exchange deposits to 5 per cent from 3 per cent and that further steps as part of its “liraization strategy” will be taken this year and in 2023.

The central bank started to promote the conversion from forex deposits to lira deposits under the strategy in December 2021, as it sought to support the ailing lira, resulting in an increase in the share of lira in banks’ balance sheets.

“The practice has strengthened banks’ balance sheets, thereby supporting financial stability,” the bank said.

It said in the statement that by the beginning of 2023 the level of securities which banks must hold will be based on the target for the share of Turkish lira deposits in total deposits.

From 2023, banks whose lira deposits are less than 50 per cent of their total deposits will have to maintain an additional 7 percentage points of bonds.

The lira was little changed at 18.5890 against the dollar after the central bank announcement.

The central bank is expected to cut its policy rate by 100 basis points to 11 per cent this week, according to a Reuters poll, after President Tayyip Erdogan called for more easing each month and said rates should be single digits by year-end.

The bank embarked on an easing cycle last autumn and also shocked markets with rate cuts in the past two months. As a result of the easing cycle, the lira weakened 44 per cent last year and is down another 29 per cent this year.