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Legal Alerts

12/01/2017

Turkish Central Bank intervenes to increase liquidity

Legal Alerts
Banking & Finance
General

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:

MaturityNew RatiosPrevious Ratios
 

Core Liabilities excluding deposits of foreign banks

Up to one year12%12.5%
One year or more8%8.5%
 

Non-Core Liabilities including foreign banks deposits

One year or less24%24.5%
Two years or less19%19.5%
Three years or less14%14.5%
Five years or less6%6.5%
More than five years4%4.5%
 

Borrower Funds

All12%12.5%
 

Non-Core Liabilities excluding deposits

One year or less19%19.5%
Two years or less13%13.5%
Three years or less7%7.5%
Five years or less6%6.5%
More than five years5%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.