September 25, 2021, 8:42

    Turkey raises required reserve ratios for forex deposits

    Turkey raises required reserve ratios for forex deposits

    ISTANBUL, Sept 15 (Reuters) – Turkey's central bank said on Wednesday it raised the required reserve ratio for forex and precious metal deposits by 200 basis points, in a move economists said aimed to preserve its own reserves and discourage hard currency deposits.

    Lira-denominated required reserves will rise by 13.9 billion lira ($1.65 billion), and that of forex and gold will rise by the equivalent of $3.4 billion as of Oct. 1, when the move takes effect, the bank said.

    The move comes after the central bank said in July that the reserve option mechanism (ROM) – which allows lenders to hold lira reserve requirements in foreign currencies – would be phased out by Oct. 1.

    Economists said the new requirements aimed to offset the end of ROM and prevent a draw-down of the central bank's required reserves, which have rebounded in recent months from lows.

    "This move aims at improving the reserves of the Central Bank and creating less tendency to foreign currency deposits by the banks," Oyak Securities said in a note.

    The central bank's net forex reserves touched a low of $9.9 billion in April, down from $41 billion at the end of 2019.

    Though net reserves had risen to $27.9 billion as of Sept. 3, they remain deeply negative once swaps – which the bank used to prop up reserves – are deducted.

    The required reserve ratio was raised to 23% from 21% for forex deposit accounts and participation funds with a maturity of up to a year, and to 17% from 15% for those with a maturity of a year or longer, the central bank said.

    The ratio was raised to 24% from 22% for precious metal deposit accounts with a maturity of up to a year, and to 20% from 18% for those with a maturity of a year or longer.

    Banks are to begin new calculations as of Sept. 17.

    In July, the upper limit of the ROM was decreased to 10% from 20%.

    Reporting by Nevzat Devranoglu, Ali Kucukgocmen, Ezgi Erkoyun and Tuvan Gumrukcu; Editing by Kim Coghill and Jonathan Spicer


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