Turkey’s state-run banks make lira conversion a performance criteria
Turkey’s main state-run banks have set targets for employees to persuade clients to convert deposits in foreign currency to liras, Reuters reported on Tuesday.
The new performance criteria follows the announcement of a deposit-protection plan announced by President Recep Tayyip Erdoğan last month aimed at bolstering the lira’s value, Reuters said, citing more than half a dozen bankers, customers and others with the matter.
"We are being called numerous times every day and asked how much we converted," said one banker, who requested anonymity.
The lira lost 44 percent of its value against the dollar last year despite a sharp rally in the week of Dec. 20, when Erdoğan announced the plan. The currency was trading down 0.5 percent at 13.59 per dollar at 10:46 a.m. on Wednesday, off a record low of 18.36 per dollar reached on Dec. 20, just before Erdoğan spoke.
General managers of the state-run banks were telephoning customers with at least $5 million in foreign currency deposits to promote the new campaign, Reuters said. Other employees were approaching those with smaller holdings, it said.
Banking customers have converted about 131 billion liras ($9.7 billion) into the scheme, Treasury and Finance Minister Nureddin Nebati said on Friday. That is equal to about 2.4 percent of total banking deposits of 5.42 trillion liras, according to data published by the industry regulator. The government says 15 percent of the inflows may have come from foreign currency accounts, an amount equal to $1.45 billion of Turkey’s $260 billion of forex deposits.
The government is now considering tweaking the programme to shorten the minimum duration for the qualifying deposits to one month from three, one person said. The Treasury did not immediately comment on the employee targets or on the plan to reduce the durations, Reuters said.
Ziraat Bank, the largest state-run bank, declined to comment. Vakıfbank and Halkbank did not respond to requests for comment sent on Friday. All three are controlled by Turkey’s sovereign wealth fund, which is chaired by Erdoğan.
Foreign financial institutions including Bank of America are warning that the deposit plan may become financially unsustainable for the Treasury if the lira resumes its sharp losses against the dollar. Returns from the new lira deposits are pegged to the value of the dollar should the lira decline beyond a minimum annual interest rate of 14 percent.
The plan offers Turks no protection against inflation, which accelerated to 36.1 percent in December. Annual price increases may reach 55 percent by May, U.S. investment bank JPMorgan said this month. Inflation in Turkey has surged after the central bank cut interest rates to 14 percent from 19 percent since September.
British bank Standard Chartered said this week that it expected the lira to decline to 20 per dollar by the end of the year, citing inflation, lax monetary policy and the government's unconventional economic measures.