The share of foreign currency deposits in Turkey’s banking system has fallen more than 10 percentage points since Ankara introduced a scheme to safeguard deposits against the exchange rate volatility, the Treasury and Finance Ministry said on Wednesday.

Under the scheme, introduced in December, the Treasury and central bank guarantee lira deposits with up to a 12-month duration against depreciation.

The first forex-protected deposits in the so-called KKM scheme reached maturity this week.

The scheme looks to encourage foreign currency holders to convert their funds to lira and keep their savings in Turkish money. It effectively ties the value of special new deposits to the dollar by promising to compensate for losses incurred from volatility in the exchange rate.

Some TL 3.5 trillion ($236 billion) of the TL 6 trillion total bank deposits were in hard currencies as of March 11, according to data from the Banking Regulation and Supervision Agency (BDDK).

The Treasury and Finance Ministry said KKM deposits had reached a total of TL 591 billion ($40 billion) as of March 22, in more than a million accounts.

“With the impact of the stability created by the KKM scheme, the volatility in financial markets has remained limited despite the Russia-Ukraine crisis and the (U.S. Federal Reserve) interest rate hike,” the statement noted.

The lira was flat at 14.83 against the dollar on Wednesday, having held steady in recent sessions after depreciating when Russia first invaded Ukraine. It has declined 11% this year after sliding 44% in 2021.

The initial KKM deposits, virtually all personal accounts, reached maturity on Tuesday. In the first week, accounts with a value of some TL 80 billion will mature.

The cost to the Treasury and the central bank in the first week of maturing accounts is set to be just over TL 10 billion.

At the current lira exchange rate, the cost of the entire amount held in the scheme stands at around TL 30 billion-TL 35 billion.

According to bankers’ calculations, the cost of the entire amount of deposits in the scheme would rise to TL 45 billion if the Turkish currency weakens beyond 15 to the dollar.

If it were to reach 18, close to the record low of 18.4 touched in December, the cost would rise to TL 165 billion, they show.

Central Bank of the Republic of Turkey (CBRT) Governor Şahap Kavcıoğlu told a meeting with business leaders on Tuesday there was very high interest in the scheme and Turks whose deposits were reaching maturity were preferring to remain in it.