17 October 2009 / TODAY'S ZAMAN WITH WIRES, İSTANBUL
The Turkish Central Bank announced on Friday that it had lowered the local currency reserve requirement to 5 percent from the previous 6 percent, which will free up some TL 3.3 billion and provide a significant injection of liquidity into the Turkish banking system.
In a written statement released earlier on Friday, the central bank noted that the 1 percent cut in the local currency reserve requirement was introduced to support the upward trend in deposits made in Turkish lira through lowering intermediation costs and providing lasting liquidity to the markets. The rates can be adjusted in two ways -- either up or down -- in the future if it is needed in accordance with liquidity conditions and developments taking place in the markets, the central bank stressed. The statement reported that the banking system has been suffering a decline in loan supply as funding opportunities of banks from abroad have contracted along with increasing caution prevailing in the sector due to the global financial crisis, adding that loan applications have also decreased because of the uncertainties and the slowdown in economic activities. As a result, the central bank remarked, the credit market has narrowed. However, the statement said a slight recovery has occurred in the credit market thanks to precautions taken by the central bank to ensure liquidity of local and foreign currencies along with the improvements taking place in risk perception in the global markets. The reduction comes on the heels of an announcement of half percent cuts in interest rates on Thursday. In a bid to protect credit markets from the adverse impact of the global financial crisis, the central bank had cut the foreign currency reserve requirement to 9 percent from the previous 11 percent but had left local currency reserve requirements unchanged at 6 percent, on Dec. 5, 2008. These foreign currency reserve requirement cuts had freed up some $2.5 billion of foreign exchange liquidity for the banking sector.
