Reuters: New measures on the way in the economy

The Central Bank of the Republic of Turkey (CBRT) unexpectedly lowered the policy rate by 100 basis points to 13% yesterday in order to compensate for the loss of momentum in economic activity and to support employment and industrial production.

The bank also gave the signal that it could take a new step towards the credit transfer mechanism in the PPK text yesterday. In the text, it is evaluated that the policy-credit rate gap, which has been significantly opened recently, is considered to reduce the effectiveness of monetary transmission,” and it was stated that “The Board has decided to further strengthen the macroprudential policy set with tools that will support the effectiveness of the monetary transmission mechanism.”

After these statements of the CBRT, many expectations and opinions began to emerge regarding the step(s) to be taken in the markets. Although the CBRT stated the direction of the step in the text of the PPK, it did not make a clearer comment about its time and content.


All three bankers, who gave information to Reuters, agree that steps will be taken to reduce loan rates. While doing this, it is also expected that the positive separation towards selective loans will be maintained or strengthened. Bankers consulted by Reuters think that the CBRT has given a clear message about loans in the MPC text.

Expectations for new applications, similar to those already used by the CBRT, such as more provisioning in case loan rates are used above a certain rate, come to the fore. The CBRT is currently obligated to hold ZK for loans and bonds against foreign currency deposits.

This time, bankers expect the step towards bonds for loans to come to the fore. Because the step is both compatible with the previous steps of the CBRT and can ensure that non-credit resources reach the Treasury again.

There are also macroprudential measures and works such as the use of TL more in collateralization, the use of long-term fixed coupon bonds in collateral, and the extension of repo maturities, as announced earlier by the CBRT.


A banker stated that he expected three different steps, and one of them could have the purpose of limiting loan interests, “For example, a limit of 22% can be imposed on commercial loan interests. For example, with this limitation, if it gives loans over 22%, it is obligatory for the bank to hold long-term bonds at a certain rate of the loan. It may be the most appropriate regulation for the purpose stated by the CBRT.

The CBRT states that it closely monitors the growth rate of loans and the availability of financing resources to meet economic activity in line with its purpose.

Similarly, in another part of the CBRT’s MPC text of yesterday, the statement “Credit, collateral and liquidity policy steps whose evaluation processes have been completed will continue to be used to strengthen the effectiveness of the monetary policy transmission mechanism.” The expectation of a step that will converge the interest rates towards the recently reduced 13% in the market was also formed with the CBRT’s interest rate decision yesterday.

The government states that it will reduce inflation later with a policy focused on the current account surplus. In this context, while net export-oriented loans that foresee foreign exchange sales are priced close to the policy rate; similar corporate loans cost close to 40%, while individual loans cost around 50%.

Although there are some exceptions to these loan cost generalizations, net export-oriented loans are provided at a much lower cost under current policy. In the process, representatives of the business world and the Central Bank criticized each other very harshly.

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