Turkey requires banks to convert more foreign currency to liras
Turkey’s central bank issued a midnight communique requiring the nation’s banks to convert more of their foreign currency deposits into liras.
It hiked the foreign exchange required reserve ratios for banks that fail to adhere to the minimum limit, according to the statement published in the Official Gazette.
Minimum conversion rates will now apply to corporate accounts as well as individual accounts, the bank said.
Turkey’s lira has lost more than a quarter of its value this year despite the central bank spending tens of billions of dollars of its reserves on defending the currency and acquiring cross-currency swaps from countries including the United Arab Emirates and South Korea. The lira slumped by 44 percent in 2021, forcing the government to introduce bank deposits linked to the value of the dollar.
Banks will be required to hold an additional 5 percentage points of forex required reserves should the forex to lira conversion percentage on either corporate or personal accounts be lower than 10 percent. Should the conversion rate lie between 10 percent and 20 percent, forex required reserves must be increased by 3 percentage points.
The conversion rate brackets were previously 5 percent and between 5 percent and 10 percent. The new rules will be implemented on Sept. 2.
The lira was trading down less than 0.1 percent at 18.19 per dollar on Wednesday.