Turkey Tweaks Required Reserves Incentives for Banks

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(Bloomberg) -- Turkey’s central bank unveiled new conditions to facilitate banks’ required reserves incentives to help support sustainable economic growth.

It cited the “likely impacts of the recent surge in consumer loans” on economic growth, inflation and external balances, as well as the increase in loan growth triggered by lira borrowing extended to facilitate early repayment or restructuring of foreign exchange cash loans, as the reasons for the change.

“The new practice will help channel loan supply toward productive and production-oriented sectors that will support sustainable growth, rather than consumption, affect the current-account balance positively and support financial stability,” the central bank said in a statement on Saturday.

Banks with real annual loan growth of more than 15% and adjusted real loan growth to selected sectors of below 15%; and banks with real loan growth below 15% and adjusted real loan rate above 5% will be able to benefit from the incentive changes, according to the statement. The industries included agriculture, forestry and fishing, mining, manufacturing, electricity, gas, steam and air conditioning supply, and transportation and storage.

The changes come after the central bank said last month it’s monitoring the impact of the increase in loans on inflation and the current account. In August, the Turkish central bank introduced regulatory changes that reward banks that lend more.

Total loans rose by more than 12% in January compared with a year earlier, according to data from the Turkish banking regulator, while consumer loans were 25% higher at the end of February, central bank data show. In the last quarter, Turkey’s gross domestic product surged 6% from a year earlier, more than the highest forecast by economists.

©2020 Bloomberg L.P.

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