As the Turkish currency continues to remain stable at around 13 lira per one US dollar after shedding nearly half of its value last year, an exclusive report by Reuters claims that Turkey’s largest state-owned banks have started implementing a program to urge depositors to “convert foreign currencies into lira under a deposit-protection plan.”
The nation’s three big state-owned banks are Ziraat Bank, Vakif Bank, and Halk Bank.
According to bankers and customers who spoke with Reuters, the state banks have also set “employee performance targets” to boost the uptake of the scheme.
Under the scheme, Turkey’s Treasury and Central Bank guarantee deposits with a three to 12 month duration against losses in the foreign exchange market, as part of a government effort to stymie capital flight amid soaring inflation.
“We are being called numerous times every day and asked how much we converted,” an unnamed banker is quoted as saying, while another person familiar with the matter said bank general managers are being tasked with calling clients with at least $5 million in foreign deposits.
For their part bank employees have been task with approaching those with smaller holdings.
Nonetheless, the currency protection scheme is being peddled to customers despite the fact the nation’s laws prohibit banks from pushing specific products to clients.
During a speech on 17 January, Turkish President Recep Tayyip Erdogan said that he was “pleased” with the easing of volatility in foreign exchange rates and announced his administration was working on new steps to increase interest in the Turkish lira.
“We are quite pleased with the easing of foreign exchange rate volatility and the continuation of stability,” Erdogan told reporters aboard the presidential plane on the return flight from an official visit to Albania.
But his encouraging words came just hours before British bank Standard Chartered said in a report that the lira is expected to weaken to 20 per US dollar by the end of the year.
Standard Chartered also highlighted that despite the government’s introduction of the aforementioned currency-protection program in late December, this did not reduce the dollarization of the economy and presented a risk to public finances.
The British bank went on to highlight that almost two-thirds of bank deposits in Turkey are denominated in foreign currency.
Turkey’s annual inflation surged to a 19-year high of 36.1 percent in December, the highest annual reading since September 2002, driven by a series of unorthodox interest rate cuts urged by Erdogan under a new economic policy that stresses exports, credit and investment.