Turkish central bank signals to banks it may soften measures

Turkish central bank signals to banks it may soften measures

Business

Turkish central bank signals to banks it may soften measures

ANKARA (Reuters) - Turkey's central bank signalled at a meeting with senior bankers that it would respond positively to the banks' requests to soften some measures which it has taken recently, three participants in the meeting said on Wednesday.

A government-backed scheme to protect lira deposits from depreciation, known as KKM accounts, was among the issues discussed, the bankers said, adding that similar meetings would be held in the coming weeks.

The central bank declined to comment on details of the meeting on Tuesday evening between central bank deputy governor Taha Cakmak and the banks' deputy general managers responsible for treasury operations.

The lira has weakened sharply since President Tayyip Erdogan won re-election on Sunday and as he prepares to appoint a new cabinet. Its losses against the dollar this year have reached nearly 10%.

The bankers said they made various proposals, such as calling for the softening of recent measures and drawing back into the banking system forex which recently flowed out. Cakmak said "Why not? Let's work on it" in response, they said.

The bankers said the central bank supported the decision by banks to end the application of a pre-paid premium for those opening a KKM account and they requested that it not be introduced again.

Under a measure published in Turkey's Official Gazette on May 17, the central bank required lenders to convert an extra 10% of foreign currency deposits to lira or hold more government bonds equivalent to the amount they failed to convert.

Participants in Tuesday's meeting told Reuters that the central bank would consider reversing this measure.

Four senior officials said on Wednesday that Erdogan was viewed as almost certain to include in his new cabinet former economy chief Mehmet Simsek.

A key role for Simsek, who is highly regarded by financial markets, could signal a departure from years of unorthodox policy underpinned by low-interest rates despite high inflation, and heavy state control of markets.

The four officials said that after the cabinet appointments, attention would shift to a change at the top of the central bank, with one ruling AK Party official saying it "would not be a surprise" if current governor Sahap Kavcioglu were replaced.