ISTANBUL, July 1 (Reuters) – Turkey’s central bank said on Thursday it would increase reserve requirement ratios on foreign currency deposits and took steps to strengthen the pound held in the banking system, with the aim of stemming the almost record exchange rate held by the Turks.
The bank said the revisions, which took effect on July 19, were aimed at improving the effectiveness of its monetary policy and helping to reduce inflation, which hovers around 17% in part because of the weak pound. Turkish.
To boost local currency deposits, the central bank said it would offer higher rates of pay on lira reserve requirements. Certain foreign exchange deposits converted into lire will also be exempt from minimum reserve liabilities.
Enver Erkan, chief economist at Tera Yatirim, said the revisions, including the higher rate of pay, were aimed at getting banks to keep more lira deposits.
“But the switch from foreign currency deposits to the pound is not up to the banks but to the depositors. It is important to change the decision of depositors, which can be done with (strengthening) confidence in the pound, stability and a strong yield position, “he said.
Turks have flocked to hard currencies in recent years to hedge against double-digit inflation and a struggling pound, which has lost around 14% this year after losing 20% in 2020.
Forex and locally owned precious metals hit a record high above $ 236 billion in January, but edged down to $ 226 billion as of June 18.
RATE OF PAY
Revisions to reserve requirements would increase the Turkish lira and foreign exchange-denominated reserve requirements by £ 13.2 billion ($ 1.52 billion) and $ 2.7 billion, respectively, the bank said. Read more
The rate of return on lira minimum reserves would be increased based on the ratio of foreign currency deposits to total deposits, as well as the ratio of lira deposits converted from forex to the total amount of foreign currency deposits on June 25.
It provided for four brackets under the two conditions, with pay rates between 13.5% and 19%.
The reserve requirement rate on foreign currency deposits up to one year was raised to 21% from 19%, while those on deposits with a term of one year or more were raised to 15% from 13% , according to the Official Journal.
A facility that allowed 20% of the Turkish Lira foreign currency reserve requirement to be held will be lowered to 10% until the September 17 calculation date and fully lifted after that, the Official Gazette also said.
Reporting by Can Sezer and Ali Kucukgocmen; Editing by Shri Navaratnam and Jonathan Spicer
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