CBRT: FX deposit RRRs increase

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According to the decision published in the Official Gazette, the Central Bank increased the required reserve ratio for foreign currency deposits by 200 basis points.

 

·        The required reserve ratio for FX deposits/participation funds was increased from 23% to 25% for up to one year, and from 17% to 19% for those with maturities of one year or longer.

·        The reserve requirement ratio was increased from 24% to 26% for precious metal deposit accounts with a maturity of up to one year, and from 20% to 22% for those with maturities of one year or longer.

·        In the statement made by the Central Bank, it was stated that TRY required reserves are expected to increase by approximately 7.4 billion TRY, and foreign currency reserve requirements are expected to increase by approximately 3.8 billion USD equivalent.

·        The upper limit for holding standard gold for Turkish lira required reserves was reduced from 15% to 10%. This facility will be gradually reduced and terminated.

·        These changes will take effect from the calculation date of 28 October with the maintenance period starting on 12 November.

 

The CBRT last increased 200 basis points in FX deposit required reserves on September 15. Within the scope of the exit strategy from the reserve option mechanism, the possibility of banks to maintain a certain percentage of the Turkish lira required reserves they have to keep at the CBRT in foreign currency (dollar and/or euro) and standard gold is gradually being reduced as far as we can see. On the other hand, an increase in FX RR rates will make it more costly for banks to hold FX deposits. On the other hand, the fact that more foreign currency deposits will enter the Central Bank’s account within the scope of the foreign exchange RR ratio increased to 25%, will provide the short-term temporary reserve effect. This means that we will see a temporary increase in gross reserves.

 

Although we do not find it correct to make monetary policy predictions from the monetary transmission mechanism and the use of side policy tools for FX/TRY liquidity, we think that the Central Bank is in a policy cycle where it can cut more interest rates at this stage. We expect this policy trend to continue at the 18 November MPC meeting.

 

Kaynak Tera Yatırım-Enver Erkan
Hibya Haber Ajansı

Kaynak: Hibya Haber Ajansı

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