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

Changes to Mandatory Reserves

Legal Alerts
Banking & Finance
General

Recent Development

The Central Bank of the Republic of Turkey (the “CBRT“) amended (the “Amendment”) the Communiqué No. 2013/15 on Mandatory Reserves (the “Communiqué”). The Amendment entered into force upon its publication in the Official Gazette No. 30973 on December 9, 2019, and is retroactively effective as of November 29, 2019.

The Amendment alters the required annual loan growth ratios that banks must satisfy to benefit from the mandatory reserve incentives discussed in our client alert dated August 26, 2019.

What’s New?

Change in the Calculation of Annual Real Loan Growth Rate

  • Prior to the Amendment, the calculations of banks’ annual loan growth rate excluded FX indexed loans and loans extended to banks.
  • When calculating the real annual loan growth rate:
    • Loans extended to financial institutions, along with FX indexed loans will be excluded;
    • The real annual growth rate of loans will be calculated based on the last three months’ average of the real cash loan stock values; and
    • The nominal loan amount will be divided by the CPI of the relevant period for the calculation the real cash loan value.

Adjusted Real Annual Loan Growth Rate

  • Pursuant to the Amendment, an adjusted real annual loan growth rate will be generated separately for banks whose real annual loan growth rate calculated according to the foregoing is below or above 15%.
  • The adjusted real annual loan growth rate will be calculated as follows:
If the Real Annual Loan Growth Rate of the Bank is
> %15
Numerator of the real annual loan growth rate(Changes in housing loans with a five-year and longer maturity)
+
(Changes in commercial loans with a two-year and longer maturity (excluding consumer loans and personal credit cards))
=

U1
(Adjusted Real Annual Loan Growth Rate)

If the Real Annual Loan Growth Rate of the Bank is
%15
Numerator of the real annual loan growth rate(50% of the annual real change in consumer loans and personal credit cards (excluding housing loans with a five-year and longer maturity))=

U2
(Adjusted Real Annual Loan Growth Rate)

  • According to above calculation, banks whose U1 rate is 15% or below and banks whose U2 rate is 5% or above must set aside a 2% mandatory reserve rate for each maturity segment, except for:
    • deposits and participation funds with a one-year and longer term (excluding foreign bank deposits/participation funds); and
    • other obligations with a term longer than three years (including foreign bank deposits/participation funds).
  • Banks must inform the CBRT of their loan growth rates and related data by the end of the submission period of the mandatory reserve requirement statements.

New Provisional Clause

  • According to the provisional clause regulated under the Amendment, banks whose annual loan growth rate is between 10% and 20% by November 29, 2019, as per the previous version of the Communiqué, must also set aside a 2% mandatory reserve rate for six reserve requirement maintenance periods as of the date they were in the 10%-20% growth rate range.

Conclusion

Banks that meet the above criteria will benefit from mandatory reserves incentives.

The Amendment encourages channeling the loan supply towards production-oriented sectors instead of consumption-oriented sectors during the rebalancing stage of the Turkish economy.