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Turkish Bank Raises Foreign Currency Reserve Ratio to Reduce Liquidity
Turkey’s central bank raised the foreign currency requirement that banks must deposit, reversing part of a step it took to increase liquidity during the global financial crisis.
The bank in Ankara raised the requirement to 10 percent for foreign currency loans from 9.5 percent, according to a directive published in the Official Gazette today. The increase will reduce foreign exchange liquidity by about $720 million, the bank said in an e-mailed statement.
Today’s decision means the bank is halfway to reversing the two percentage point cut it made to the foreign currency reserve requirement on Dec. 5, 2008. On April 14 the bank outlined plans for an exit strategy to unwind liquidity-boosting measures it took in 2008 and 2009.
The bank “aims to kill two birds with one stone,” Ozgur Altug, chief economist for BGC Partners in Istanbul, said in a note to investors. “It implements its exit strategy and reverses the helping measures and second, it tries to limit the appreciation of the lira against other currencies.”
The lira was little changed, trading at 1.5124 per dollar at 9:34 a.m. in Istanbul. It has strengthened against the dollar since the start of July, when it was at 1.5845 per dollar.
Today’s decision won’t be enough to help Turkish exporters and the bank should increase the size of its daily purchases of dollars from the market, Mehmet Buyukeksi, head of the Turkish Exporters’ Assembly, told Bloomberg HT television today.
The bank holds auctions daily to buy up to $60 million as it seeks to build up its reserves, which stood at $72.5 billion on July 16, according to a July 22 announcement.
The bank today left the reserve requirement for local currency unchanged at 5 percent.
During the crisis the bank also lowered Turkish lira reserve requirements, extended the term of repo auctions to three months and acted as a broker to allow banks to borrow and lend foreign currency.
To contact the reporters on this story: Steve Bryant in Ankara at sbryant5@bloomberg.net;
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