According to the decree published in the Official Gazette, the central bank revised the practice of holding securities in lira by increasing lenders' "securities establishment rate" from 3% to 5%. According to this;

-Securities will be held according to TL deposit share targets as of 2023 instead of exchange rates.

-The central bank said in a separate statement that further steps will be taken in the remainder of the year and in 2023 as part of its 'liraization strategy'.

-The program aims to encourage conversion from foreign currency deposits to Turkish lira deposits within the scope of the “liraization strategy”.

Although it is seen as one of the frequent and changes in regulation, it is aimed to increase the amount of bonds held by banks by increasing the security facility from 3% to 5%. Of course, these will have short-term and long-term effects on bank balance sheets. Banks started to buy CPI-indexed bonds to protect themselves in order to have a real profit. However, with the securities establishment obligations, they are directed to fixed income debt instruments with low interest rates. While there is a chance to be protected with a bond equal to inflation, in an environment where inflation is very high, such mandatory bond holding obligations cause profit to appear only in nominal terms and not in real terms. In the short term, the interest rates of the bonds came down and profits seem to have been made as a result of these steps. However, since it will be difficult for inflation to reach 10.5% on average in the long run, it will actually be reflected as a regular loss effect in real terms.

The main effect of this will be on the bonds with a maturity of 5 years and longer, the compound interest rate in the last auction was 10.7%, while our Eurobond interest rate with the same maturity was 10.5%. If we consider that the inflation is 8.2% in the US and 83.5% in Turkey, it is not easy for these returns to remain at these levels continuously, but it also shows that the bond market is not formed in the eyes of the free market. Because the bond market becomes a market where demand is made by the banks and pension funds, which are obliged to buy, not by the real investor, exactly with supply and demand.

If we look at the computational reflections from the banks' point of view, they may need to accelerate a little more towards converting their foreign currency deposits into TL, as compared to the old rates. In the securities facility, the ratio of TL deposits to total deposits is monitored and this ratio must be at least 50%. Looking at the sector data of the BRSA for August, the ratio of TL deposits to total deposits is 43.9% for the whole sector, 49.3% for the public sector, 41.6% for the private sector and 40.6% for foreign banks. If TL deposit is below 50%, 7 points, if it is between 50-60%, there is an extra security facility of 2 points. If it is over 60%, there is no facility. Therefore, banks have to create a change that will include the general deposit in order to meet the rate. To achieve this, banks may need to create a very serious FX protected account transformation and make extra commitments to customers. Lowering FX and increasing FX protected account removes banks from the "penalty zone", but the cumulative dollarization effect created by foreign exchange-indexed deposits in addition to normal dollarization increases.

The Central Bank wants to reference the policy rate, which was 12% and is expected to drop to 11% this week and 9% by the end of the year. But when we put bank costs + mark up + profit, the loan interest rates, which should normally be above 5 points, cannot fall close to these levels in any way. In an environment where deposit rates can rise to 20% or 23%, loan outflows naturally slow down, which affects the operability of the system and monetary transmission mechanism.

Kaynak: Tera Yatırım-Enver Erkan
Hibya Haber Ajansı