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Erdoğan’s AKP proposing changes to Turkish Central Bank legal reserves

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Turkish President Tayyip Erdoğan’s Justice and Development Party (AKP) is proposing changes in the central bank’s legal reserve ratios, party official Mehmet Muş said on Monday, to bring the level in line with trade law, Reuters reported.

“We are making [central bank] legal reserves comply with Turkish trade law. We are proposing that legal reserves be 10 percent of profits after necessary deductions are made,” Muş said.

The current level is 20 percent of profits.

In June Reuters reported that the Turkish government revived its plans to transfer the central bank’s 46 billion lira ($8 billion) in legal reserves to its deteriorating budget to narrow the deficit.

The legal reserves, which are separate from the central bank’s foreign exchange reserves, are what the central bank sets aside from profits by law to be used in extraordinary circumstances. 

Speaking to reporters, Muş also said the proposed amendment to the law will authorize the central bank to determine required reserves in terms of assets.

“In terms of required reserves we are proposing to give certain authority to the central bank to determine the amount of required reserves by taking into account assets, not only liabilities,” Muş said.

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