Erdogan forcing commercial banks to raise their foreign currency in the Turkish central bank

The Turkish President is trying to hold the failing currency

Turkey has said it is raising the rate of foreign exchange holdings by commercial banks at the country’s central bank, a move that is expected to boost the country’s reserves by about $ 9.2 billion.

The monetary authority said that the so-called reserve requirement ratios increased by 300 basis points for all foreign currency deposits regardless of their maturity.

The change will force commercial banks to “park” more of their foreign currency deposits with the monetary authority, increasing the reserves of the central bank. The central bank justified the announcement as part of a normalisation policy after providing additional hard currency to financial markets in March to mitigate the negative effects of the Covid-19 pandemic.

The level of central bank reserves has been a concern for some Turkish analysts since last year, when authorities began forcing commercial banks to lend foreign currency to the state through swaps.

Burned $ 15 billion since the New Year

However, the nation’s gross reserves fell from more than $ 105 billion at the beginning of the year to just over $ 90 billion last week, according to the latest official figures.

In addition, Turkey’s state-owned commercial banks sold dollars to support the lira, which has lost about 13% of its value this year.