The minimum interest requirement for KKM accounts has been removed

The Central Bank (CBRT) has taken a new step on the Protected Exchange Rate Deposit (KKM).

Consequently, the CBRT abolished the minimum interest requirement on KKM accounts converted into Turkish lira.

In KKM the minimum interest rate was applied as the policy interest. The official rate was increased by 500 basis points to 30 percent at the last CBRT meeting.

Therefore, the way was opened for banks to offer interest rates below the policy rate for exchange rate protected accounts converted into TL.

THE BANK WILL COVER THE FULL DIFFERENCE

While standard TL deposits will be supported with the switch, the interest paid to KKM will not be attractive.
In KKM accounts where rates lower than the Central Bank’s policy interest are applied, if the exchange rate difference is higher than the interest or dividend payable by the bank but lower than the amount calculated with the policy interest, the difference will be covered total. by the Bank.

If the exchange rate difference is greater than the amount calculated with the policy interest, the part of the support amount up to the amount calculated with the policy interest will be paid by the bank, while the previous part will be paid by the Central Bank.

The CBRT adopted a series of measures to make Turkish lira deposits attractive.

In August, the TL participation ratio, which included exchange rate protected accounts on TL deposits in securities and mandatory reserve practices, was abolished and replaced by a new TL participation ratio, which did not consider protected accounts against the exchange rate as TL deposits and aimed to increase the proportion of deposits in TL, which is the standard local currency, in total deposits.

In September, in line with data showing that the transition to TL was accelerating, the TL share increase target, which was set at 2 percent per month for real people, was increased to 2.5 percent . Additionally, with the transition and renewal to TL, TL share calculations were revised.

On the other hand, in order to facilitate the flow of credit, the invoice exemption limit for loans to exports, investments and SMEs was increased from 50,000 to 250,000 TL.

ŞİMŞEK SAID ‘THERE WILL BE A GRADUAL EXIT FROM THE KKM’

Minister of Treasury and Finance Mehmet Şimşek also gave a message of gradual exit from the KKM in a statement he made on September 11.

Şimşek said:

“I don’t prefer to talk much about deposits protected by exchange rate. Our priority is to implement the program. Our priority is to accumulate reserves.

To the extent we achieve them, we will implement our KKM exit strategy. Do we have a strategy? We have her. We will achieve this gradually.

Depositors should feel comforted. We will not make any significant changes. We will only be able to pursue a different strategy to the extent that we make lira deposits attractive, establish permanent macro-financial stability and strengthen our reserves. But from today KKM will continue to exist.”

ERKAN: WE WILL INCREASE DEMAND FOR TL ASSETS

On the other hand, in the opening speech of the OIC-COMCEC Central Banks Forum meeting at the time this step was announced, CBRT Governor Hafize Gaye Erkan said:

* We will continue to aggressively implement our roadmap to establish disinflation in 2024.

* Our recent regulations aim to increase the proportion of deposits in Turkish lira.

* Leading indicators indicate that domestic and foreign investors have begun to increase the proportion of Turkish lira assets in their portfolios.

* We are determined to increase local and international demand for Turkish lira assets. (SÖZCÜ, AA)