Türkiye’s central bank Friday announced fresh steps to simplify the macroprudential framework and increase the share of Turkish lira deposits, a day after the monetary authority delivered another hefty rate hike.
Treasury and Finance Minister Mehmet Şimşek said these steps were important for a better functioning market economy.
The move came a day after the Central Bank of the Republic of Türkiye (CBRT) raised its benchmark policy rate by 500 basis points to 35% as expected, tightening aggressively for a third straight month as it steps up efforts to rein in soaring inflation.
In Friday's statement, the bank said that among simplification steps it was terminating the securities maintenance practice applied to banks at a rate of 30% based on lira-denominated cash loans they extend.
“Likewise, the types of loans excluded from this practice will no longer be subject to the securities maintenance in case they are not extended against expenditure,” the statement read.
The securities maintenance practice applied at a rate of 30% on securities issued by the real sector and purchased by banks was also terminated.
The bank said securities maintenance practice that banks are subject to for lira commercial loans based on the interest rate/dividend rate banks apply above 1.8 times the reference rate would be abolished.
It also terminated the securities maintenance practice that factoring companies are subject to for factoring receivables based on the interest rate that these companies apply above 2.7 times the reference rate.
The bank also said access to export loans will be facilitated by exempting imports of investment goods from the net exporter requirement.
This move aligns with the recent similar adjustment made by the bank in re-discounting loans.
The bank said changes will be made to the practice of charging commissions on reserve requirements for foreign exchange deposits in order to increase the share of lira through the renewal of foreign exchange-protected accounts and their conversion to lira.
“For banks with a Turkish lira conversion rate higher than 10%, the portion exceeding the target will be counted toward the conversion target,” it noted.
The targeted monthly rise for the share of real persons’ lira deposits was increased to 3.5% from 2.5%.
The technical details of the decisions will be explained in related regulations, the bank said.
A key technocrat in the new economy administration President Recep Tayyip Erdoğan named after the May elections, Şimşek emphasized the importance of the simplification measures for fostering a more efficient market economy.
"These are important steps toward a more efficient market economy. The aim is to ease access to loans and encourage the transition to TL," he wrote on social media platform X, formerly known as Twitter.
Since June, the new administration has reversed the yearslong easing cycle and aggressively lifted interest rates to conquer inflation, rebuild foreign currency reserves, and curb the chronic current account deficit.
Under the new governor, Hafize Gaye Erkan, the central bank hiked its key policy rate by a combined 2,650 basis points over the last five months, accompanied by other macroprudential measures, such as credit tightening to cut domestic demand, the main driver of inflation.
The bank has said the tightening, backed by Erdoğan, would continue with supportive measures in addition to rate hikes.
On Thursday, the bank's monetary policy committee repeated it is ready to raise rates further as needed to curb inflation, which climbed to an annual rate of 61.53% in September and is expected to rise into next year.
The bank said it "decided to continue the monetary tightening process in order to establish the disinflation course as soon as possible, to anchor inflation expectations, and to control the deterioration in pricing behavior."
"The simplification process is progressing gradually, taking into account impact analyses. Within this scope, additional steps aimed at increasing the share of TL deposits will continue to strengthen the monetary transmission mechanism," the monetary policy committee statement read.
