In its decision dated July 20, 2023, the Monetary Policy Committee has reaffirmed its commitment to an ongoing gradual simplification process aimed at bolstering macro financial stability and enhancing market mechanisms’ effectiveness.
As part of this comprehensive simplification strategy, the committee has announced the discontinuation of the practice that mandates a target for converting foreign currency deposits into FX-protected deposits. Additionally, the securities maintenance and reserve requirement practices based on the Turkish lira share will also be ceased.
The primary objective of these regulatory adjustments is to foster an increase in Turkish lira deposits while simultaneously reducing the prevalence of FX-protected deposits. This will be achieved by facilitating the transition from FX-protected accounts to Turkish lira deposits.
The overarching goal is to reinforce macro financial stability through the promotion of Turkish lira time deposits. To achieve this, the committee’s decision includes the following measures:
- Conversion Target: The initiative aims to transition accounts with FX-protection, provided by the Central Bank, into Turkish lira accounts. It also encourages the renewal of FX-protected accounts at a predetermined ratio.
- Share Enhancement: The focus will be on increasing the proportion of Turkish lira accounts without FX protection.
The outlined simplification process, alongside the steps associated with shifting from FX-protected deposits to Turkish lira deposits, will be executed in accordance with the principles communicated by the Monetary Policy Committee.
This strategic move reflects Turkey’s commitment to fostering a more robust financial ecosystem, driving the utilization of Turkish lira accounts, and furthering the stability of the macroeconomic landscape. As the process unfolds, it is anticipated that these initiatives will play a pivotal role in enhancing the country’s financial resilience and strengthening its market mechanisms.
