Excess liquidity reaches record level

Despite the counter-moves of the Central Bank of the Republic of Turkey (TCMB), excess liquidity in the banking system rose to a record level of 363.2 billion TL. While the Central Bank of the Republic of Turkey (TCMB) was taking steps towards quantitative tightening, the increase in excess liquidity in the system brought a record. According to TCMB data, net funding was recorded as minus 363.2 billion TL as of December 29. This situation pointed to excess liquidity in the system. Previously, in September 2023, excess liquidity had increased to 338.8 billion TL and broke a record. While the momentum in excess liquidity continued, a series of moves had been made by TCMB. With the measures announced at the beginning of November, TCMB increased the required reserve ratios in currency-protected deposits and introduced additional reserve application in TL for foreign currency deposits. These applications came into effect as of November 10. However, net funding entered the negative zone again on November 22 and a negative momentum was observed in net funding after this date. During this period, the CBRT made a new move and started TL deposit purchase auctions. Among the series of measures announced by the CBRT along with its latest interest rate decision was the opening of a TL deposit purchase auction. In the statement made by the bank, it was reminded that Article 52 of the Central Bank of the Republic of Turkey Law stipulates that open market operations can be conducted in order to effectively regulate money supply and liquidity within the framework of monetary policy targets. In this context, it was stated that Turkish Lira deposit purchase auctions would be held in order to strengthen the monetary transmission mechanism and increase the variety of sterilization tools used. The auctions started on December 22.