Turkish central bank increases forex reserve requirement ratios

Turkey's central bank announced on Saturday that it increased its reserve requirement ratios on foreign currency deposits and participation funds by 200 basis points for all maturities.

The bank said in a statement on its web site that the revised ratios would result in the withdrawal of approximately $2.9 billion of forex liquidity from the market. 

It said the decision was made to support financial stability and the real loan growth-linked reserve requirement practice. 

The ratios will remain unchanged for banks that comply with lira real loan growth conditions to ensure that such banks are not affected by this increase, the central bank said.

The bank in August announced regulatory changes that link the amount of cash lenders have to put aside as reserves depending on how much credit they extend, in an effort to support the government’s policy to stimulate growth through cheap loans.

Turkey’s central bank has increased its reserve requirement ratios several times since a currency crisis in August 2018 to discourage locals from converting lira into other currencies.