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Legal Alerts

January 12, 2017

Turkish Central Bank intervenes to increase liquidity

Legal Alerts
Banking & Finance

Recent Development

On January 11, 2017, the Central Bank of the Republic of Turkey (the “Central Bank“) has reduced banks’ foreign exchange liabilities related reserve requirements by 50 basis points to provide extra liquidity to the market. The changes take effect starting from December 30, 2016.

New FOREX reserve requirements

The Central Bank has reduced the foreign exchange liabilities related reserve requirements by 50 basis points for each maturity bracket:

Maturity New Ratios Previous Ratios
 

Core Liabilities excluding deposits of foreign banks

Up to one year 12% 12.5%
One year or more 8% 8.5%
 

Non-Core Liabilities including foreign banks deposits

One year or less 24% 24.5%
Two years or less 19% 19.5%
Three years or less 14% 14.5%
Five years or less 6% 6.5%
More than five years 4% 4.5%
 

Borrower Funds

All 12% 12.5%
 

Non-Core Liabilities excluding deposits

One year or less 19% 19.5%
Two years or less 13% 13.5%
Three years or less 7% 7.5%
Five years or less 6% 6.5%
More than five years 5% 5.5%

 

Conclusion 

Once again the Central Bank has used its innovative policy tools to enhance liquidity in the market by decreasing the foreign exchange reserve requirements. It is expected that the changes would provide approximately USD 1.5 billion to the market.