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Turkey’s Central Bank on Thursday revised its regulations on reserve requirements “to improve the effectiveness of the monetary transmission mechanism.”

The bank increased reserve requirement ratios for foreign exchange (FX) deposits/participation by 200 basis points for all maturity brackets.

“The upper limit of the facility for holding FX will be decreased from 20% to 10% of Turkish lira reserve requirements. The facility will be terminated on 1 October 2021,” the bank said a statement.

With this decision, the bank said it expects that Turkish lira and FX denominated required reserves will increase by approximately 13.2 billion Turkish liras and $2.7 billion, respectively.

“FX deposits/participation funds available as of 25 June 2021 and converted to Turkish lira deposits/participation funds after this date will be exempt from reserve requirement liabilities,” the bank said.

“Additional remuneration rate will be applied to Turkish lira denominated required reserves to increase the share of Turkish lira in the total deposit/participation funds in the banking system.”

The changes will “be effective from the calculation date of 19 July 2021 with the maintenance period starting on 6 August 2021,” the statement added.

Source: Anadolu Agency

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