Details of Turkey's new foreign exchange-indexed deposit account system

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The Ministry of Treasury and Finance has disclosed the details of the "new financial system" unveiled by President Recep Tayyip Erdoğan yesterday (December 20).

The new deposit product named "Foreign Exchange-Protected Turkish Lira Deposit" was introduced to protect depositors from the volatility of foreign exchange rates, the ministry said.

CLICK - Erdoğan announces new new financial system, lira gains ground

Accordingly, the interest to be accrued on lira-denominated time deposit accounts will be compared with the change in the foreign exchange rates on maturity dates and if the lira's depreciation against hard currencies exceeds the interest rate, the Treasury will compensate for the difference.

No withholding tax will be applied to foreign-exchange indexed deposits.

For foreign exchange difference calculations, the Central Bank will announce a US dollar buying rate at 11 a.m. every day.

Foreign exchange-indexed accounts can be opened with maturities of three, six, nine or 12 months.

The minimum interest rate of these accounts will be the policy rate announced by the Central Bank.

Any bank will be able to join the system.

In case of withdrawal of money from the account before the maturity date, the account will become a current account and depositors will not be able to receive interest.

The president announced the system following the lira's unprecedented depreciation over the past month. The lira, which had lost about 50 percent in value against dollar since the start of the year, gained about 15 percent within hours after Erdoğan's announcement. (HA/VK)