The increase in exchange rates causes serious problems for the Turkish economy, specifically inflation, interest rates, and excessive volatility in the financial markets, due to exchange rate fragility increased by the lack of foreign capital inflows, which is caused by the current account deficit problem. As of 20 December 2021, some regulations have been introduced against the increasing speculative fluctuations in exchange rates. One of them is the Foreign Exchange Protected TL Deposit Account.
The Foreign Exchange Protected TL Deposit Account provides the saver with a return on the interest rate offered at the opening of the account and offers an option to protect their TL savings against possible exchange rate risk throughout the term. If the interest rate yield at maturity is lower than the rate of increase in the exchange rate, the increase in the exchange rate will be reflected in the account, and the exchange rate difference exceeding the interest yield will be covered from the budget of the Ministry of Treasury and Finance. In the opposite case, the interest rate return will be obtained.
-
A Foreign Exchange Protected TL Deposit Account can be opened in TL with maturities of 3, 6, 9 months and 1 year, only real people can benefit.
-
The CBRT Policy interest rate will be applied as the minimum interest rate
-
There is no maximum amount limit on accounts, partial withdrawals cannot be made.
-
Zero withholding rate is applied for income from this account, i.e. there is no income tax deduction.
-
If the account is closed before the maturity date, the principal amount is determined over the lower of the CBRT buying rate announced at 11:00 on the opening date of the account (USD, EUR or GBP) and the CBRT buying rate announced at 11:00 on the date of closing the account. Also, no interest yield is paid. In this case, there is a risk of loss from the principal in case of a decrease in the exchange rate.
-
Up to two hundred thousand TL of the total principal and interest of the account is guaranteed by the savings deposit insurance.
We can explain this with an example: Let’s say, the deposited amount is 100,000 TL, Interest Rate 14%, Maturity 3 months (91 days), the account opening date index rate (CBRT at 11 am) is 1 USD = 13 TL, the account closing (expiry date) date index rate (CBRT at 11 pm) is 1 USD = 14 TL. Then, interest income will be 3.490 TL, TL equivalent of exchange rate increase = 7.692 TL. (So the exchange rate increase is higher). In this case, the exchange rate difference is added to the principal at the end of the maturity, and the amount to be paid is 107,692 TL
If the USD rate at maturity is 13 TL or less, only interest is added and 103.490 TL is paid at the end of maturity. If these and other short-term implementations are successful, it will be possible to stabilize exchange rates in the first 6 months of 2022, thereby increasing the predictability of the markets, which in turn will reduce the pass-through of exchange rates on inflation and interest rates in the short term. However, in order to get results in the long run, economic policies aimed at solving investment, production, employment, foreign trade balance, and other structural problems should be implemented decisively.
Dr.Bülent İlhan
