Step from the Central Bank to reduce commercial loan rates

CBTIn the announcement of the Bank on the subject, it was reminded that the required reserve and general liquidity applications, which are based on the on-balance sheet or off-balance sheet items of banks and other financial institutions, are among the main duties and authorities of the Central Bank.

In the announcement, it was stated that the Central Bank strengthened its macro prudential toolkit with required reserve and securities establishment practices over both asset and liability items in order to support financial stability and strengthen the monetary transmission mechanism:

“The Monetary Policy Committee shared with the public in its announcement dated May 26, 2022 that the collateral and liquidity steps, whose evaluation processes have been completed, will be put into use. In this context, with the Communiqué numbered 2022/20 published on June 10, 2022, the implementation of Turkish lira securities over foreign currency deposit/participation fund liabilities. Within the scope of this regulation, banks establish securities at the rates determined according to the conversion targets to Turkish lira deposit/participation accounts.The first facility was realized on 29 July 2022.

In its announcement dated August 18, 2022, the Monetary Policy Committee stated that the growth rate of loans and the meeting of the financing resources accessed with economic activity in line with its purpose were closely followed, and that the policy-loan interest gap, which had recently opened significantly, reduced the effectiveness of monetary transmission. In this context, the Board shared with the public that the macro prudential policy set will be further strengthened in order to support the effectiveness of the monetary transmission mechanism, and that the credit, collateral and liquidity policy steps whose evaluation processes have been completed will continue to be used.

In the announcement, as a result of the evaluations made, it was stated that the required reserve facility, which was applied at the level of 20 percent for the loans subject to the required reserve, specified in the announcement dated April 23, 2022, was decided to be replaced by a 30 percent security facility for banks in order to increase the effectiveness of the application.

In the statement, it was noted that as of December 30, 2022, it was decided to establish a security amounting to the loan amount exceeding the loan growth rate of 10 percent compared to July 29, 2022, for one year.

In the announcement, 20 percent of the loan amount to be extended with a compound annual interest rate of 1.4 times the annual compound reference rate published by the Central Bank for commercial loans to be extended until the end of 2022 from the date of publication of the communiqué, and the loan to be extended with a compound annual interest rate of 1.8 times. It was stated that it was decided to establish securities at the rate of 90 percent of the amount.

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