On January 11, 2017, the Central Bank of the Republic of Turkey (the “Central Bank“) has reduced banks’ foreign exchange liabilities related reserve requirements by 50 basis points to provide extra liquidity to the market. The changes take effect starting from December 30, 2016.
New FOREX reserve requirements
The Central Bank has reduced the foreign exchange liabilities related reserve requirements by 50 basis points for each maturity bracket:
| Maturity | New Ratios | Previous Ratios |
| Core Liabilities excluding deposits of foreign banks | ||
| Up to one year | 12% | 12.5% |
| One year or more | 8% | 8.5% |
| Non-Core Liabilities including foreign banks deposits | ||
| One year or less | 24% | 24.5% |
| Two years or less | 19% | 19.5% |
| Three years or less | 14% | 14.5% |
| Five years or less | 6% | 6.5% |
| More than five years | 4% | 4.5% |
| Borrower Funds | ||
| All | 12% | 12.5% |
| Non-Core Liabilities excluding deposits | ||
| One year or less | 19% | 19.5% |
| Two years or less | 13% | 13.5% |
| Three years or less | 7% | 7.5% |
| Five years or less | 6% | 6.5% |
| More than five years | 5% | 5.5% |
Conclusion
Once again the Central Bank has used its innovative policy tools to enhance liquidity in the market by decreasing the foreign exchange reserve requirements. It is expected that the changes would provide approximately USD 1.5 billion to the market.
By Muhsin Keskin, Partner, and Erdal Ekinci, Head of Tax Practice, Baker McKenzie
