Turkey’s Central Bank on Thursday revised its regulations on reserve requirements “to improve the effectiveness of the monetary transmission mechanism.”

The bank decreased Turkish lira reserve requirement ratios by 200 basis points – for all maturity brackets.

“The upper limit of the facility for holding FX [foreign exchange] will be decreased from 20% to 10% of Turkish lira reserve requirements. The facility will be terminated on 1 October 2021,” read a statement.

With this decision, the bank said it expects that Turkish lira and FX denominated required reserves will increase by approximately 13.2 billion Turkish liras and $2.7 billion, respectively.

“Additional remuneration rate will be applied to Turkish lira denominated required reserves to increase the share of Turkish lira in the total deposit/participation funds in the banking system,” the statement said.

“These changes will be effective from the calculation date of 19 February 2021 with the maintenance period starting on 5 March 2021.”

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