Reserve Requirement Ratios

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The reserve requirements are among important monetary policy instruments for the CBRT. In line with the new strategy that took effect in the last quarter of 2010, the CBRT developed a new policy framework towards reducing macro financial risks within the limits of favorable inflation outlook. Accordingly, in addition to the traditional policy instrument of the one-week repo auctions rate, reserve requirements were introduced as an active tool.

The liabilities subject to reserve requirements are calculated on Friday every two weeks and comprised of the following balance sheet items by taking into account the accounting standards and records of banks and financing companies, including the liabilities of foreign branches and excluding obligations to Central Bank, the Treasury, domestic banks and headquarters and branches of banks established in Turkey by international agreements.

a) Deposits / participation funds (except those received from official institutions).
b) Funds from repo transactions (except those received from Borsa İstanbul markets).
c) Loans obtained (except the loans guaranteed by the Treasury).
d) Securities issued (net).
e) Subordinated debt that are not taken into account in the calculation of own funds.
f) Liabilities to the head office abroad (net).
g) Debt to contracted merchants due to credit card transactions.
h) Borrower funds of investment banks.

Reserve requirement ratios of these liabilities are as follows:

Reserve Requirement Ratios (%)
Turkish lira
Deposits and Participation Funds (Excluding deposits/participation funds obtained from banks abroad) Ratios
- Demand, notice, up to (and including) 1 and 3-month  7
- Up to (and including) 6-month maturity  4
- Up to 1-year maturity  2
- 1-year and longer maturity  1
Borrower funds of investment banks 7
Other Liabilities (Including deposits/participation funds obtained from banks abroad) Ratios
- Up to 1-year maturity (including 1-year)  7
- Up to 3-year maturity (including 3-year) 3.5
- Longer than 3-year maturity 1
 
Foreign Currencies
Deposits and Participation Funds (Excluding deposits/participation funds obtained from banks abroad) Ratios
- Demand, notice, up to (and including) 1 - 3 - 6 months maturities and up to 1-year maturity 12
- 1-year and longer than 1-year maturity  8
Borrower funds of investment banks 12
Other Liabilities (Including deposits/participation funds obtained from banks abroad) Ratios
- Up to (and including) 1-year maturity  20
- Up to (and including) 2-year maturity  15
- Up to (and including) 3-year maturity  10
- Up to (and including) 5-year maturity 6
- Longer than 5-year maturity 4

Banks having the leverage ratios below the ratios specified in the Communiqué on the Required Reserves are subject to additional reserve requirement ratios as stated in the Communiqué.

The maintenance of required reserves begins on the next Friday after two weeks following the date of the liability calculation and lasts for 14 days. Basically, required reserves are maintained in terms of Turkish lira for Turkish lira liabilities, while they are needed to be hold in US dollar for the foreign currency liabilities denominated in US dollar, and in US dollar or euro for the remaining foreign currency liabilities.

On the other hand, up to 40% of required reserves for Turkish lira liabilities can be maintained in US dollars and/or Euros, up to 30% can be maintained in standard gold and up to 5% in wrought or scrap gold collected by banks from residents at blocked accounts at CBRT calculated by multiplying each buckets given in the table below with the corresponding coefficients for each. Additionally, up to the full amount of required reserves hold against precious metal accounts can be hold in the form of standard gold in blocked accounts.

FX Facility Ratios (%) Coefficents
0-20 1.0
20-25 1.4
25-30 1.7
30-35 2.1
35-40 2.5

 

Gold Facility Ratios (%) Coefficents
0-15 1.6
15-20 1.7
20-25 2.1
25-30 2.5

 

Wrought or Scrap Gold Facility Ratio (%) Coefficents
0-10 1.0

 

The remuneration on required reserves is implemented in accordance with the rules and principles set by CBRT. The remuneration rate of the Turkish Lira required reserves is 1300 basis points. Remuneration of the Turkish Lira required reserves is paid on the first business day following the end of the months March, June, September and December.

 

Renumeration for US dollar denominated required reserves  is calculated in terms of Turkish Lira  by utilizing the interest rate set by CBRT on a daily basis and indicative foreign currency buying rate declared at the relevant time.