The decline trend continues in FX-indexed deposits (KKM)

FX-indexed deposits

The momentum of decline in FX-indexed deposits (KKM) continued during the week of October 27th. With this week’s figures, the decrease in KKM over the last 10 weeks has reached 400 billion Turkish Lira.

According to data from the Banking Regulation and Supervision Agency (BDDK), FX-indexed deposits witnessed a decrease of 62.3 billion Turkish Lira in the week ending on October 27th. During this period, the total volume of FX-indexed deposits dropped to 3 trillion TL. When observed in US dollars, the total amount in KKM reached 107 billion dollars.

The data revealed a significant decrease of up to 400 billion Turkish Lira in KKM over the last 10 weeks.

While the downward trend in KKM continues, measures discouraging KKM from the economic management continue to be implemented. Most recently, a decision was made to increase mandatory reserves in KKM.

Consequently, the mandatory reserve ratio in KKM accounts was raised, introducing an additional mandatory reserve ratio in Turkish Lira for foreign currency deposits. According to the regulation published in the Official Gazette, the mandatory reserve ratio for KKM with a maturity of up to 6 months was increased from 25% to 30%. For deposits maturing in up to 1 year and those maturing in 1 year or longer, the mandatory reserve ratio was raised from 5% to 10%.

The mandatory reserve ratios for foreign currency deposits/participation funds were increased by 1 percentage point across all maturities. Additionally, for Turkish lira-denominated deposits, an additional 4% mandatory reserve requirement was decided to be applied to all maturities. In order to encourage investments from abroad, the deadline for the mandatory reserve exemption for these funds has been extended from December 31, 2023, to the end of 2024.

Hafize Gaye Erkan, the President of the Central Bank of the Republic of Turkey (CBRT), stated that with these measures, they anticipate a withdrawal of 350 billion Turkish Lira from the system.

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