Turkish Central Bank raises maximum forex collateral ratio

ISTANBUL - Reuters

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Turkey’s Central Bank will increase the amount of foreign-denominated collateral banks can pledge against borrowing in the interbank market, it said on Jan. 10.

The maximum ratio of forex collateral will rise to 70 percent from 50 percent from Jan. 13, the bank said, adding that the move is expected to lift demand for forex-denominated bonds issued abroad by the Turkish Treasury.

“This arrangement is expected to play a stabilizing role against the stress likely to be experienced in credit risk pricing due to global factors,” the bank said in a statement, citing its own 2016 policy document.

The Turkish Lira slipped to three-month lows last week and has been vulnerable to changes in global sentiment since the central bank last month left interest rates unchanged, contrary to expectations of an increase, renewing fears about its independence.

The forex collateral move will be adjusted further when deemed necessary, based on developments in global market conditions, the bank said.