Recent development 

In an effort to increase macro-prudential supervision of banks, on January 9, 2016 the Central Bank of Turkey introduced new reserve requirements for banks holding borrower funds of investment and development banks in Turkey and increased the reserve requirements for deposits held outside of Turkey. The changes will be effective from the maintenance period commencing February 12, 2016.

  • Investment and development banks' borrower funds are now included in bank liabilities for which reserves must be set aside, which was previously unregulated. The Central Bank will apply 11.5% and 13% reserve requirement ratios to borrower funds.  
  • Deposits and participation funds from banks abroad will now be classified under non-core liabilities and will be subject to higher reserve requirement ratios, up to double the previously required reserves.

Conclusion 

Under the amended Communiqué on Reserve Requirements, investment and development banks will need to set aside reserves for their borrower funds accounts and banks' deposits abroad must set a significant amount of extra reserves. Considering recent developments in the sector, such as the implementation of Basel III rules, Turkey continues to increase macro-prudential supervision of banks.