Turkey's state banks boosted lira rally after Erdogan rescue plan -four sources (updated)

Turkiye Vakiflar Bankasi TAO

23/12/2021 13:52

* One source says $3 bln sold Monday-Tuesday
    * Lira rallied from record lows after scheme announced
    * Central bank backed massive interventions in 2019-2020

 (Adds past interventions, details on sales)
    By Orhan Coskun, Nevzat Devranoglu and Ebru Tuncay
    ANKARA, Dec 23 (Reuters) - Turkey's state banks aggressively
sold dollars this week, boosting a rally in the lira after
President Tayyip Erdogan announced a deposit-protection scheme
meant to stem a currency crisis, according to four sources
familiar with the moves.
    The selling coincided with a drop in the central bank's
foreign reserves, according to official data and a trader who
told Reuters they declined by nearly $6 billion on Monday and
Tuesday alone. 
    A second source, a chief bank advisor, said state bank
interventions on Monday and Tuesday totalled $3 billion. The
other two sources, including a senior Turkish official, said the
interventions were intense and extended later in the week.
    The three big state banks - Ziraat Bank, Vakif Bank
 VAKBN.IS  and Halk Bank  HALKB.IS  - did not immediately
comment on possible interventions. The central bank was not
immediately available to comment. 
    The lira has soared more than 50% this week, rebounding from
record lows, after Erdogan late on Monday announced a scheme in
which the Treasury and central bank would guarantee some local
currency deposits against depreciation losses.  urn:newsml:reuters.com:*:nL8N2T80XZ
    In 2019-2020, the central bank backed, via swaps, the sale
of some $128 billion via state banks to stabilize the lira,
depleting Turkey's foreign reserves. Earlier this year, the
sales emerged as a focus of what the political opposition calls
government mismanagement.  urn:newsml:reuters.com:*:nL8N2MG64V 
    To address the latest market turmoil, the central bank has
announced five direct market interventions this month that
bankers say totalled between $6-$10 billion. It has made no
intervention notices this week. 
    Official data shows that the bank's net foreign reserves
dropped to $12 billion last week, from $21 billion a week
earlier, as the interventions weighed. 
    The government says the deposit-protection scheme encourages
Turks to hold lira rather than hard currencies, which account
for more than half of local savings.  urn:newsml:reuters.com:*:nL8N2T22RQ 
    Analysts have warned that if the lira's rally fizzles and
reverses, the scheme could further stoke inflation, add to
public debt, and eat into foreign reserves.  
    Faik Oztrak, spokesperson for the main political opposition
CHP, said on Twitter the lira shot up "apparently due to selling
foreign currency through the back door again," citing a
$6-billion drop in net reserves on Monday and Tuesday.  
    Ziraat Chief Executive Alpaslan Cakar, who also heads the
Turkish Banks Association, said the overall dollar-selling
pressure amounted to about $1 billion in markets on Monday after
Erdogan's announcement.  urn:newsml:reuters.com:*:nA4N2P201V 

    

 (Reporting by Orhan Coskun, Nevzat Devranoglu and Ebru Tuncay;
Writing by Jonathan Spicer;
Editing by Bernadette Baum)
 ((jonathan.spicer@reuters.com; Reuters Messaging:
jonathan.spicer.thomsonreuters.com@reuters.net 
@jonathanspicer))