Turkey’s lira sinks further as currency protection scheme changes
Banks are upset with a Central Bank plan to move depositors’ savings out of accounts designed to protect the lira’s value.
A new policy from Turkey’s central bank that aims to phase out a lira protection scheme has been met with opposition from private banks, and the currency fell to another record low on Tuesday.
What happened: Turkey instituted “foreign exchange-protected accounts” known as KKM in December of 2021 in response to a plunge in the lira’s value. These accounts enabled lira depositors to receive guaranteed compensation from the state for any depreciation of the lira that exceeded the interest.
On Sunday, Turkey’s Central Bank said that private banks must gradually convince depositors to convert their savings from KKM into normal lira accounts. However, a number of private banks feel they will not be able to meet the government’s conversion targets and will need to take on more government debt as a result. On Monday, the banks held a teleconference with Central Bank officials to voice their discontent, Bloomberg reported.
The purpose of the new policy is to increase the volume of normal lira deposits. The value of deposits in KKM was 3.36 trillion lira ($124 billion) as of Aug. 11, the pro-government Turkish news outlet Hurriyet reported.
