ANKARA, May 27 (Reuters) - Turkeyâ€™s central bank has raised reserve requirement rates for foreign exchange deposits at commercial banks, extending e
ANKARA, May 27 (Reuters) – Turkeyâ€™s central bank has raised reserve requirement rates for foreign exchange deposits at commercial banks, extending efforts to discourage locals converting lira into other currencies.
Turks have flocked to foreign currencies since a lira crisis last year, with foreign exchange deposits and funds, including precious metals, held by Turkish individuals and institutions hitting a high of $182 billion on May 17.
The central bank said on Monday it had raised the reserve requirement ratios for forex deposits and participation funds by 200 basis points for all maturities to support stability.
The bank added that the move would lead to the withdrawal of $4.2 billion of forex liquidity the market.
The latest move by the central bank makes it more costly for banks to keep forex deposits, one trader said.
â€œIt aims to make it more attractive for banks to collect lira deposits,â€ the trader said. â€œAs a secondary effect, it is a decision that will increase the central bankâ€™s reserves.â€
The lira has fallen some 37% since the beginning of 2018, driving the economy into recession. The central bankâ€™s move helped the currency strengthen briefly on Monday.
The lira stood at 6.0600 against the dollar at 1010 GMT, having earlier firmed to 6.0370. It was around 6.0635 before the central bankâ€™s announcement.
Investors have been concerned about the central bankâ€™s ability to defend the lira in the case of another sharp decline, given its reserves have fallen significantly in recent months. â€˜DEPOSITOR CONFIDENCEâ€™
Ankara has already taken several steps to discourage Turks turning to forex deposits, such as this month raising a tax on some foreign exchange sales to 0.1%, zero.
The BDDK banking watchdog last week imposed a one-day settlement delay on forex purchases of more than $100,000 by individuals.
Credit rating agency Moodyâ€™s said on Monday that recent regulations could impact Turkish banks negatively, adding that the increased dollarisation would lower demand for the lira.
Forex deposits accounted for 55% of all deposits in the banking sector as of May 17, data on the BDDKâ€™s website showed.
â€œGiven the increased concentration of foreign-currency deposits in banksâ€™ funding profiles, the recent regulations are negative for Turkish banksâ€™ credit quality because they weaken depositor confidence, specifically in relation to foreign-exchange deposits,â€ Moodyâ€™s said. (Reporting by Tuvan Gumrukcu, Ece Toksabay and Nevzat Devranoglu in Ankara and Michael Shields in […]