THE DECREASE in the total amount of the FX-protected TRY deposit accounts (KKM) has ground to a halt. The decline started after a new decision was introduced to reduce the total amount in KKM and imposed sanctions on banks that could not progress in this field.
The drop totaled TRY 2.2bn in the week ending on September 22, according to the Banking Regulation and Supervision Agency. However, the figure reached TRY 102bn in August 28-September 15. So, the weekly decrease of TRY 25bn fell to TRY 2.2bn.
The amount in KKM dropped by USD 863m on a dollar basis due to the hike in USD/TRY, which was 26.83 on September 15 and reached 27.02 on September 22.
The total amount in KKM hovered around TRY 3.3tr, or USD 122.3bn, on September 22.
The Central Bank removed the minimum interest rate requirement for KKM opened in the lira. The interest rate provided as much as the policy rate minimum. The policy rate is 30% under current conditions. The minimum interest rate requirement continues for FX-converted KKM.
The removal does not make a difference for savers who remain in KKM by considering the FX return. They will benefit from the FX rate hike if the FX rate hike is higher than the interest rate.
The interest rate can be the only loss. Earning was possible previously if the FX rate hike remained limited. That return was missed out as the interest rate decreased.
Banks reduced the lowest interest rate, which was 30% for KKM in lira following the decision. They currently provide a 20% interest rate.
Those who think FX doesn’t make a gain and don’t like this interest rate can directly switch to TRY deposits. The interest rate for TRY deposits hovers around 40%.
Although banks reduced the interest rate to around 20% for KKM in lira, banks will meet the burden, or they and the Central Bank share it, if the FX rate hike is higher than the interest rate.
For instance, if a bank provides a 20% interest rate for the maturity period when FX rates increase by 26%, it will pay a burden, corresponding to 26%. So, banks will meet the FX rate hikes up to 30% for this period.
For example, if FX rates increase more than 30% and banks provide a 20% interest rate for KKM, banks will meet 10 points. Or, the Central Bank will meet the 5-point difference between the FX rate hike of 35% and the policy rate of 30%.