Turkish central bank unveils new steps to boost de-dollarization

Türkiye’s central bank announced on Friday fresh steps in line
with its goals to boost de-dollarization and keep down Turkish lira
government bond yields, Trend reports citing Daily Sabah.

The Central Bank of the Republic of Türkiye (CBRT) has raised
the ratio of securities that banks must maintain if their lira
deposits amount to between 50% and 60% of their total deposits to
seven percentage points from two points, according to an
announcement in the country’s Official Gazette.

The central bank had been indicating recently that it may
further strengthen its macroprudential policy set, given the
persistent demand for hard currency and some pick up in both bond
and loan yields, Tera Yatırım said in a note.

The lira has been weakening slightly against the dollar
recently, having been stable in recent months. It was steady at
19.2580 on Friday morning, having weakened from 18.7195 at the end
of last year.

The currency lost some 30% of its value against the dollar last
year and 44% in 2021.

The central bank also said an additional 5% reserve requirement
would be applied on forex deposits for banks with a lira share of
less than 60% in total deposits.

The bank re-introduced forex-to-lira deposit conversion targets,
requiring banks to maintain various amounts of securities based on
multiple conversion targets on various dates.

It also increased the discount rate of CPI-linked securities in
the collateral pool to 80% from 70% in a move promoting fixed
coupon bonds. The security maintenance requirement for loans
extended at a rate 1.8x above the reference rate was increased to
150% from 90%.

Encouraging the use of local currency in bank deposits is a
cornerstone of the central bank’s “liraization” strategy.