Turkish Central Bank removes minimum interest on FX-protected accounts

Turkish Central Bank (CBRT) has eliminated the minimum interest requirement for foreign exchange protected deposit accounts, allowing banks to offer interest rates below the policy rate on these accounts. This change, made in the application instruction, aims to enhance standard TL deposits while making the interest on foreign exchange protected deposits less appealing.

Even if the exchange rate applied to these accounts results in a bank-paid interest or profit share higher than the exchange difference but lower than the amount calculated with the policy rate, banks will cover the entire difference. If the calculated support amount is higher, the exceeding part will be paid by the Central Bank. This move is part of a broader strategy outlined by the CBRT, which on August 21, aimed to convert maturing foreign exchange protected deposit accounts to standard TL deposits. This decision was widely regarded as the first step towards exiting from foreign exchange protected deposits.

By September 14, in a second decision intending to decrease the allure of these accounts, the mandatory reserve ratio for terms up to 6 months was increased by 10 points to 25%. Additionally, in line with data showing accelerated transitions to TL in September, the monthly TL share increase target for real persons was raised from 2% to 2.5%. Revisions were also made in the calculations of TL transitions and renewals. Following these decisions, foreign exchange protected deposit accounts have decreased by 101 billion lira in four weeks, reaching a level of 3.3 trillion lira.