Turkish banks resort to selling gold

Commercial lenders in Turkey have pulled as much as $4.5 billion (Dh16.5 billion) worth of gold reserves since midJune in an effort to avert a liquidity crisis as the lira plunged.

Weekly holdings reported by the Central Bank of Turkey fell by almost a fifth since June 15 to 15.5 million ounces with the lion’s share — $3.3 billion — of the exodus sparked by the monetary authority’s August 13 move to lower reserve requirements.

“The commercial banks were probably switching to more liquid assets, given what has happened to the lira,” Jason Tuvey, a senior emerging markets economist at Capital Economics. “There’s been concern at the commercial banks over their external debt burden, which has been reflected in the rising bank bond yields.”

Turkish lenders are allowed to meet reserve requirements with bullion deposits, unlike in most other countries. The central bank cut the reserve requirements for banks by 4 percentage points for foreign exchange liabilities over one, two and three years, and by 2.5 percentage points over other maturities. This equated to $3 billion worth of dollar-equivalent gold liquidity, it said in a statement.

Of the $118 billion in short-term debts due by September 2019, 15 per cent accrues to publicly-owned banks, and 44 per cent to private financial institutions, according to Nora Neuteboom, an ABN Amro Group NV economist who specialises in Turkey.