Turkey lowers asset ratio as part of normalization

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Turkey‘s banking regulator on Sept. 28 lowered the asset ratio calculation for deposit banks to 90 percent from 95 percent and for participation banks to 70 percent from 75 percent, in a bid to boost the lira.

The decision will be effective from Oct. 1, according to a statement by the Banking Regulation and Supervision Agency.

As a continuation of the normalization, the regulator noted, steps will be taken for the aforementioned board decisions promulgated during the pandemic period where uncertainties and risks in global markets increased.

This came at a time when the country is making efforts to lasso inflation and support price stability, trying to calm down the markets.

Last week, the Turkish Central Bank raised its benchmark rate.

For the first time since a currency crisis in late 2018, the bank raised its one-week repo rate – also known as the bank’s policy rate – by 200 basis points, from 8.25 percent to 10.25 percent.

The asset ratio was introduced earlier this year to push financial institutions to step up lending, buy government bonds and engage in swap transactions with the central bank.

Central Bank reserves reach $83.8 bln in August

Meanwhile, the Turkish Central Bank on Sept. 28 announced that its official reserves amounted to $83.8 billion as of the end of August.

Total reserve assets posted a fall of 7.2 percent in August versus the end of July, the bank’s international reserves and foreign currency liquidity report showed.

Foreign currency reserves – in convertible foreign currencies – totaled some $38.8 billion, down 14.1 percent compared to the previous month.

In August, the bank’s gold reserves – including gold deposits and, if appropriate, gold swapped – also down by 0.3 percent monthly to $43.4 billion.

Short term predetermined net drains of the government and central bank, including foreign currency loans, securities, foreign exchange deposit liabilities, increased by 2.8 percent to $25.6 billion, of which $20.3 billion were in principal repayments and $5.3 billion in interest payments, according to the report.

Additionally, outstanding foreign exchange and gold liabilities arising from the bank’s financial derivative activities with resident and non-resident banks recorded $64 billion, of which $26.3 billion is due in one month.

Hurriyet Daily News

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