Turkey Tweaks Reserve Rule to Encourage Savings in Liras

Turkey’s central bank is removing reserve requirements for lira deposits with longer maturities, part of an ongoing effort to encourage savings and lending in the local currency.

(Bloomberg) —

Turkey’s central bank is removing reserve requirements for lira deposits with longer maturities, part of an ongoing effort to encourage savings and lending in the local currency. 

Reserve requirement ratios for lira deposits with a maturity longer than three months will be lowered to zero from current levels as high as 6%, the bank said in a statement on its website late Saturday. The ratio will be held at 8% for deposits with a maturity of less than three months. The changes are to come into effect as of Feb. 3.

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The decision comes as the central bank “aims to increase the weight of the Turkish lira on both the asset and liability sides of the banking system,” according to a statement published early Sunday. 

The bank also stated that it will take further steps in order to support lira deposits. The monetary authority has long said it wants to shift residents’ savings away from US dollars.  

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The central bank started a cycle of rate cuts last year, taking the benchmark rate to 9% in November, while blaming inflation that peaked at 17 times the official target on high energy prices and a weak currency. 

At the same time, the bank has been using fringe tools to support local currency deposits at a time of negative real interest rates on deposits when adjusted for inflation. 

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