Page 9 - TURKRptDec20
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Turks continue to buy gold and FX.
November 12 marked the end of the frequent struggle to work out whether it is hot money flows or the Turkish government’s invisible hand that is keeping Turkey’s markets afloat.
The Turkey bloodhounds are lapping up big currency gains and 10%+ interest rates, swapping their lira for Turkish banks’ FX.
“BUY TURKEY” notes rained down. There’s not a financial institution left that hasn’t issued one.
We have of course seen these parties before. And each time, the party ended in the cop shop.
This latest bash, however, has started out with a particularly wild mood, the likes of which has not been seen in a long time.
Also on November 12, Erdogan met with executives from the Turkey-based International Investors Association (YASED).
On November 19, the central bank hiked its main policy rate (the one-week repo) by 475bp to 15%, in a remark suggesting that yet again the market ends up taking what it wanted after another chapter of futile manoeuvering by Erdogan.
The end of the central bank’s rate corridor will be sold as “normalisation” and as the national lender getting back to orthodox monetary policy, but the devil remains in the detail—the central bank funds the banking system mainly through USD-TRY swaps conducted with local banks.
The central bank’s one-week swap rate was also hiked to 15% on November 20, but much bigger funding is provided at lower costs (See Section 8.2).
Turkey’s banking watchdog BDDK will scrap the asset ratio slapped on local banks at end-2020, the regulator said on November 24.
In April, the BDDK introduced the ratio to push lenders to boost loans, curb FX deposits and deposit rates, buy government bonds and swap their FX with the central bank.
On November 26, the central bank scrapped the reserve requirement rules that award banks with high loan growth rates and punish those with low rates.
9 TURKEY Country Report December 2020 www.intellinews.com
