Bloomberg News

Turkey Cuts Reserves Requirements, Freeing $1.3 Billion

October 05, 2011

(Updates with economist comment in fourth paragraph.)

Oct. 5 (Bloomberg) -- Turkey’s central bank cut reserve requirements for lenders’ foreign currency liabilities, releasing an additional $1.3 billion in liquidity after the lira set a historic low against the dollar.

The move will ease liquidity and support banks’ efforts to extend the maturity of their foreign currency financing once it takes effect on Oct. 14, the Ankara-based bank said in a statement on its website today.

The bank cut the reserve ratio by half a percentage point for liabilities up to three years and by 2.5 percentage points for longer-term liabilities such as bonds issued in foreign currencies by Turkish banks, according to the statement.

The cut will “support the lira a little,” Gizem Oztok, economist for Garanti Securities in Istanbul, wrote in an e- mailed comment. “It will also impact bank industry profits by about 0.6 percentage points.”

Governor Erdem Basci said Sept. 28 the reduction was likely, and would be designed to encourage banks to borrow externally over longer terms.

The main share index gained 1.5 percent at 10:07 after the announcement, with the advance led by Turkiye Garanti Bankasi AS, the biggest listed bank, which rose 2.1 percent to 6.90 liras.

The lira fell to a record low of 1.9077 per dollar yesterday and was trading at 1.8923 per dollar after the central bank announcement.

--Editors: Louis Meixler, Karl Maier.

To contact the reporter on this story: Steve Bryant in Ankara at sbryant5@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net


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