Recent Development
The Central Bank of the Republic of Turkey (the "CBRT") amended Communiqué No. 2013/15 on Mandatory Reserves (the "Amendment").
What's New?
Previously, the CBRT had taken many steps, including but not limited to reserve requirements, to combat the impact on the economy of the COVID-19 pandemic.
This time, the CBRT adjusted the reserve requirements in
accordance with the normalization process.
Pursuant to the Amendment, reserve requirement ratios have been
increased by 300 basis points in all foreign currency liabilities
for all banks.
As of July 10, 2020, the following foreign currency reserve requirement ratios are applicable to banks that are not eligible to benefit from reserve requirement incentives:
| Deposits and participation funds (except offshore bank deposits and participation funds) | ||
| Previous ratio | Current ratio | |
| a) without a term, at notice or with a term of up to one month, three months, six months and one year | 19% | 22% |
| b) with a one-year or longer term | 15% | 18% |
| Borrowers' funds | 19% | 22% |
|
Other obligations (including offshore bank deposits and participation funds) |
||
| Previous ratio | Current ratio | |
| a) with a term of up to one year (including one year) | 21% | 24% |
| b) with a term of up to two years (including two years) | 16% | 19% |
| c) with a term of up to three years (including three years) | 11% | 14% |
| d) with a term of up to five years (including five years) | 7% | 10% |
| e) with a term longer than five years | 5% | 8% |
As of July 10, 2020, the following foreign currency reserve requirement ratios are applicable to banks that are eligible to benefit from reserve requirement incentives:
| Deposits and participation funds (except offshore bank deposits and participation funds) | ||
| Previous ratio | Current ratio | |
| a) without a term, at notice or with a term of up to one month, three months, six months and one year | 12% | 15% |
| b) with a one-year or longer term | 8% | 11% |
| Borrowers' funds | 12% | 15% |
|
Other obligations (including offshore bank deposits and participation funds) |
||
| Previous ratio | Current ratio | |
| a) with a term of up to one year (including one year) | 16% | 19% |
| b) with a term of up to two years (including two years) | 11% | 14% |
| c) with a term of up to three years (including three years) | 6% | 9% |
| d) with a term of up to five years (including five years) | 2% | 5% |
| e) with a term longer than five years | 0% | 3% |
Conclusion
Banks are retrospectively subject to amended reserve requirement ratios as of July 10, 2020.
With the Amendment, the CBRT aims to support financial stability. As a result, approximately USD 9.2 billion of foreign currency and gold liquidity is expected to be withdrawn from the market.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
