Pharm Tech Titans

By Ebru Tuncay and Nevzat Devranoglu

ISTANBUL, Sept 15 (Reuters) – Interest rates on dollar deposits have dropped sharply in Turkey in recent days after its central bank passed a regulation imposing high commission payments on foreign exchange transactions, three bankers said on Thursday.

The bankers told Reuters that rates in the market generally had fallen to some 3.5% to 4% from about 7%, with rates on the balance sheets of some private banks dipping to below 1%.

The forex commission regulation was the central bank’s latest step to encourage lenders to convert forex deposits to lira, in a drive to reverse a years-long dollarisation trend and to support an unorthodox policy of monetary easing.

The bankers said this regulation, unveiled late last month, had led to a reduction in foreign currency deposits as well as a decrease in deposit interest rates over the course of this week.

“After the latest regulations, banks started to reduce their foreign currency deposits,” said one banker, who like the others requested anonymity.

“The balance sheet of each bank is different but in recent days the interest rate given to foreign currency deposits has gradually decreased from 6-7% to below 1%. Among the rates given in the market is 0.35%,” the person said.

The series of financial-sector regulations in recent months have prompted some banks to curtail corporate lending due to costs and risks, Reuters has reported.

They came after the lira tumbled 44% to the dollar in 2021 and another 27% this year, driven by a rate-cutting policy that pushed inflation above 80% last month, its highest in 24 years.

Bankers had told Reuters at the start of this month that the central bank started charging 3% commission on forex required reserves for lenders whose lira deposits make up less than 50% of all deposits.

Among other steps, the central bank cut its policy rate 100 basis points to 13% last month and unveiled higher reserve requirement collateral for lenders, replacing a 20% reserve requirement ratio for credits with a higher 30% treasury bond collateral requirement.

The central bank letter to banks at the end of last month said the commission was designed to support a rise in the lira share of deposits within the framework of the bank’s so-called liraisation policy.(Writing by Daren Butler; Editing by Jonathan Spicer and Jonathan Oatis)