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Legal Alerts
11/09/2021 https://www.esin.av.tr/wp-content/themes/esin/images/esin.jpg

Mandatory Reserve Rates Changed

Legal Alerts
Banking & Finance
General

Recent Development

The Central Bank of Turkey (“CBT”) amended the Communiqué No. 2013/15 on Mandatory Reserves (“Amendment”). The Amendment entered into force upon its publication in the Official Gazette No. 30864 dated August 20, 2019, but will be effective as of August 9, 2019.

What’s New?

  • The Amendment decreased the mandatory reserve ratios for banks that attained certain loan growth. Accordingly, banks must set aside mandatory reserves at the rate of 2% for each maturity segment (except for deposits and participation funds with a one-year and longer term and other obligations with a term longer than three years) if the annual growth rate of the total amount of their Turkish lira standard cash loans or Turkish lira cash loans under close monitoring is between 10% and 20%.
  • Banks with loan growth rates within these limits will apply the 2% mandatory reserve rate for six consecutive mandatory reserve periods starting from the first mandatory reserve period following the calculation period of the mandatory reserve rate. However, if the mandatory reserve rates are changed during this period, the banks will apply the new rate for the next periods.
  • Banks which cannot achieve this loan growth will continue to set aside mandatory reserves at previous rates.
  • FX indexed loans and loans extended to banks will not be considered in the calculation of loan growth.
  • Banks that recently obtained an operation license from the Banking Regulatory and Supervisory Authority are unable to benefit from the 2% mandatory reserve rates for two years following the date of their commencement of operations.
  • Banks must inform the CBT of their cash loan growth rates by the end of the submission period of the mandatory reserve requirement statement.

Conclusion

The Amendment aims to increase liquidity in the market by incentivizing Turkish lira loans.