Turkish Central Bank Takes New Measures to Increase Functionality of Market Mechanisms

(Patria) - The Turkish Central Bank has taken new steps in line with its goals to increase the functionality of market mechanisms, after raising interest rates to 15% from 8.5% this week.

Turkish regulations on maintaining securities have been simplified to increase the functionality of market mechanisms and strengthen macro-financial stability, the Turkish Central Bank announced, Reuters reports.

The statement notes that the decision is part of the policies announced after the recent meeting of the Monetary Policy Committee on Thursday, and that the simplification process will continue gradually.

In a statement after the committee meeting, the bank said it would simplify and improve the existing micro and macroprudential framework to increase the functionality of market mechanisms and strengthen macro-financial stability.

According to an announcement in the country's Official Gazette, the ratio of securities that Turkish banks must set aside on their foreign currency deposits has been changed to 5% from 10%.

With the new regulation, the securities that banks must maintain ranged between 3% and 12% of their lira deposits. Previously, it was between 3% and 17%.

The new regulation also states that banks whose lira deposits are less than 57% of total deposits will have to hold an additional seven percentage points of securities.

Previously, the requirement of seven additional points applied to banks that had less than 60% of deposits in liras, Reuters reported.