Turkey acts to bolster financial system amid plunging lira

ISTANBUL: Turkish policymakers made their first move to bolster the financial system and investor confidence amid a plunge in lira. The currency extended its decline in early trading.

Promising to “take all necessary measures”, the central bank in Ankara lowered the amount commercial lenders must park at the regulator and eased rules that govern how they manage their lira and foreign-currency liquidity.

While there was no mention of higher interest rates, it said all options were on the table.

“The central bank will closely monitor the market depth and price formations and take all necessary measures to maintain financial stability if deemed necessary,” according to the statement yesterday.

It’s all part of an action plan announced by Treasury and Finance Minister Berat Albayrak late on Sunday when he rejected capital controls as an option to stem outflows of hard currency and vowed to crack down on those spreading rumours that deposits would be seized.

The lira briefly trimmed losses after the central bank statement but weakened about six per cent to 6.8130 at 10.10am, here.

The currency has lost about a quarter of its value against the US dollar since the United States sanctioned two ministers in President Recep Tayyip Erdogan’s government in a spat over the continued detention of an American pastor in Turkey, pushing the Middle East’s largest economy towards a full-blown financial meltdown.