Turkish banks halt FX-protected account openings online after Central Bank’s directive

Banks in Turkey have started to stop opening of FX-protected (KKM) accounts through digital channels, in a move to comply with the Central Bank's directive to convert maturing KKM accounts into standard TL deposits and introduce potential shifts in interest rates.

Customers who inquire about these accounts are now being invited to the banks' branches to be persuaded.

Until last week, banks were attempting to convince their customers to transition from foreign exchange to KKM accounts. However, with the decision made by the Central Bank over the weekend, the banks found themselves in a predicament.

The Central Bank elevated reserve requirement ratios for FX deposits, thereby compelling banks to convince depositors shifting their holdings into regular lira accounts. The confluence of these measures aims to alleviate the undue pressure on the central bank to foot the bill for lira depreciation costs tied to the KKM program.

As a first step in response to this development, the opening of FX-linked KKM accounts via mobile and internet banking has been discontinued. According to a report by Sebnem Turhan from Ekonomim, many banks now offer KKM services only through their physical branches. The rationale behind this move is to persuade savers not to relinquish their KKM accounts.

Meanwhile, industry sources indicate that a period of dual interest rates on deposits might ensue. These sources emphasize that banks are evaluating whether to offer high TL deposit interest rates or shoulder the burden of low-interest bonds in the upcoming period. They predict a rise in TL deposit interest rates and a drop in bond yields, suggesting that TL deposit rates might reach up to 40 percent.

The total value of FX-protected accounts has reached 3.36 trillion Turkish Lira. Around 70 percent of KKM accounts are FX-linked. KKM's share of the total deposits stands at 26 percent.