An amendment was made on the Establishment of Turkish Lira Securities for Foreign Currency Liabilities published in the Official Gazette, and a temporary application was introduced regarding the establishment of securities according to credit growth. The statement from the Central Bank is as follows: “Required reserve and general liquidity practices based on the on-balance sheet or off-balance sheet items of banks and other financial institutions are among the main duties and powers of the Central Bank, which is specified in Article 4 of the Central Bank Law No. 1211. The Central Bank supports financial stability and monetary policy. In order to strengthen the transmission mechanism, it strengthens the macro prudential toolkit with required reserve and securities establishment practices on both asset and liability items.The Monetary Policy Committee announced to the public that the collateral and liquidity steps, whose evaluation processes have been completed, will be put into use on June 10, 2022. With the Communiqué numbered 2022/20 published in 2022, the practice of establishing Turkish lira securities over foreign currency deposit/participation fund liabilities was initiated. establishes securities at rates determined according to its objectives. The first facility was realized on 29 July 2022. In its announcement dated August 18, 2022, the Monetary Policy Committee stated that the growth rate of loans and the meeting of the financing resources accessed with economic activity in line with its purpose were closely followed, and that the policy-loan interest gap, which had recently opened significantly, reduced the effectiveness of monetary transmission. In this framework, the Board shared with the public that the macroprudential policy set will be further strengthened in order to support the effectiveness of the monetary transmission mechanism, and that the credit, collateral and liquidity policy steps whose evaluation processes have been completed will continue to be used. As a result of the evaluations made, for the loans subject to the required reserve stated in the announcement dated April 23, 2022: a) To replace the required reserve facility, which was applied at the level of 20 percent, with a security facility at a rate of 30 percent for banks in order to increase the efficiency of the application, b) As of December 30, 2022, 29 It has been decided that a security amounting to the loan amount exceeding the loan growth rate of 10 percent as of July 2022 will be established for one year, In addition, d) 20 percent of the loan amount to be extended with an annual compound interest rate that is 1.4 times higher than the compound annual reference rate published by the Central Bank for commercial loans to be extended from the date of the Communiqué until the end of 2022• 1.8 times the annual compound interest rate. It has been decided to establish securities at the rate of 90 percent of the loan amount to be extended at the rate of 90 percent. The technical details of the above decisions will be included in the relevant regulations. It is made available to the public.”
What are required reserve ratios?
Required reserves are a monetary policy tool. Within the framework of the new strategy that it started to implement as of the last quarter of 2010, the Central Bank developed policies to reduce macro financial risks, within the framework of the favorable inflation outlook in the same period. Accordingly, in addition to one-week repo auctions, which are the main policy instrument, reserve requirements were actively put into use. Liabilities subject to reserve requirements are calculated every two weeks as of Friday. Based on the accounting standards and registration system to which banks are subject, Turkish lira and foreign currency subject to reserve requirements, including the liabilities of foreign branches, excluding liabilities to the Central Bank, the Treasury, domestic banks and the headquarters and branches of banks established by international agreement in Turkey. creates monetary obligations.