By Anadolu Agency
December 21, 2021 2:27 pmANKARA, TURKEY
Under a new measure, Turkey will compensate lira depositors for foreign currency fluctuations while encouraging citizens to move towards Turkish lira-based assets, according to details of the mechanism released Tuesday.
The new FX-indexed Turkish lira deposits tool will be available for individuals who have a lira deposit account with a maturity of three, six, nine, or 12 months, according to a Treasury and Finance Ministry statement.
Under the facility, if the yield remains below the exchange rate difference between the account opening and its maturity dates despite the earned interest, the Treasury will compensate the depositor.
For the calculation, the Turkish Central Bank will publish the US dollar buying rate daily at 11.00 am local time (0800GMT).
All lenders – both state and private – can join the system voluntarily, the ministry said, adding that the government is also working to implement the new system for Islamic banks.
The policy rate for the measure will be the minimum interest rate applied to term deposits. The Central Bank’s policy rate is the minimum interest rate applied to term deposits.
Following a 100 basis points rate cut last week, the Turkish Central Bank’s benchmark one-week repo rate – policy rate – stands at 14%. With the latest cut, the monetary authority has lowered the key rate 500 basis points since September.
Tuesday morning, following a Monday evening speech by President Recep Tayyip Erdogan announcing the lira-based deposits tool and other measures, the lira/dollar exchange rate dropped to as low as 11.2248 as of 9.30 local time (0630GMT), gaining almost 40% against the dollar since Monday evening. At 1215GMT, it was trading at 12.96.
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