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Turkey Sees Limited Interest in Deposit Scheme Aimed at Supporting the Lira

TURKEY
  • The scheme has attracted about $6.3 billion worth of capital in its first two weeks, according to figures provided by Treasury and FinMin Nebati on Tuesday.
  • Preliminary data showed Turks have invested 84.05 billion liras ($6.33 billion) into the new deposits, Nebati said. That is equal to around 1.7% of Turkey’s total bank deposits of 4.87 trillion liras reported by the banking watchdog for Dec. 24. It equates to about 4.5% of the 1.85 trillion liras invested in lira-denominated deposits.
  • Nebati said initial public interest in the mechanism was strong.
  • “Although we are at the beginning of implementation, it is seen that the interest of the citizens in the currency protected TL time deposit/participation fund is high,” he said.
  • The deposit mechanism offers a minimum annual interest rate of 14%. It provides additional income linked to the lira’s value against the dollar should the lira lose more than that amount. People are required to invest the money for a minimum of three months, and they lose all rights to profits should they withdraw capital early.
  • While the scheme provides protection against lira weakness, returns for investors would be lower than traditional lira deposits should the lira’s declines not compensate for additional returns offered by those accounts.
  • Interest rates on traditional lira deposit accounts are currently as high as an annual 22.5%. Dutch bank ING is offering an annualised rate of 20% on 32-day deposits
  • The mechanism does not provide formal protection against inflation, which accelerated to 36.1% in December, the highest level since 2002. Inflation in Turkey is expected to exceed 40% for most of this year according to Goldman Sachs
  • The majority of money in the Turkish banking system is invested in accounts with a maturity of 32 days or less - Ahval
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
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MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
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