KKM summit with option between CBRT and banks

BLOOMBERG HT/SPECIAL- With the latest regulations made by the Central Bank of the Republic of Turkey, the uncertainty of the optional KKM that started in the banking sector was discussed at the meeting where the bank managers and the CBRT management came together on Monday evening. According to the information obtained by Bloomberg HT, the main theme of the meeting was the framework and implementation of this regulation.

At the meeting, where the restrictions introduced included live option KKMs, and which types of these transactions caused discomfort in the Central Bank, the banks expressed their reservations on the subject.

In the meeting, where the Central Bank executives conveyed the reasons for the regulation, it was stated that the discomfort was caused by the demand for foreign exchange in the market.

According to the information obtained by Bloomberg HT, it was emphasized that the regulation was made on the grounds that some banks that made optional KKM exchanged foreign currency to their customers and gave Turkish lira to the Central Bank, and then bought the same amount of foreign currency from the market in order to hedge the position.

It was stated that the regulation will be implemented effectively for banks that act in this way, and that there is no problem for banks that make the option with Turkish lira netting and manage them in their own positions.

It is stated that various proposals for the solution of the problem were also discussed at the meeting. It is stated that a study will be conducted to make the Currency Protected Deposit product more attractive in a model that will appeal to both investors and the CBRT and banks. It is also emphasized that this product, which is at the idea stage, will be checked for compliance with the legislation.

The Central Bank has made various arrangements to increase the weight of the Turkish lira in the balance sheets of banks, and within this framework, the Turkish lira weight can exceed 50 percent in corporate and individual. under He announced that 8 percent commission will be applied to the banks that are between 50-60 percent and 3 percent commission to the banks that are between 50-60 percent.

In order to achieve these ratios, banks created options to balance their foreign exchange positions on or off the balance sheet, with swap and repo transactions, as well as products such as option KKM.

In the last week of the year, the Central Bank limited these opportunities and emphasized that the exchange difference would not be paid if the optional KKM product was made as transferred.

After the negotiations between the banks and the CBRT, it is still unclear how banks will act in calculating their Turkish lira positions.