Central Bank takes action to back financial stability
The Central Bank of Turkey (CBRT) on May 9 changed reserve requirement ratios to support the stability in financial markets. “The upper limit for the FX maintenance facility within the reserve options mechanism has been lowered from 40 percent to 30 percent,” the CBRT said. Since the beginning of May, the USD/TRY exchange rate has been experiencing harsh fluctuations. The exchange rate stood at nearly 6.25 as of 5 p.m. (1400GMT) on May 9, while the average USD/TRY was around 5.75 last month. “With the revision in FX maintenance facility within the reserve options mechanism, $2.8 billion of FX liquidity will be provided to the market. “Whereas TRY 7.2 billion will be withdrawn,” the Bank said. In the same statement, the CBRT also said reserve requirement ratios for FX liabilities have been increased by 100 basis points for all maturity brackets.” As a result of the increase in FX reserve requirement ratios, $3 billion of FX liquidity will be withdrawn from the market,” it said. Early May 9, the bank also decided to suspend the one-week repo auctions for a period of time to restrain the continuing depreciation of the lira. The CBRT’s decision means around 150 basis points “indirect rise” in interest rates, while the Bank’s one-week repo rate – its policy rate - continued to stand at 24 percent.