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Central Bank Covert Rate Hike: Loans Are Getting More Expensive – According to Kerim Rota, Will Increase Even More

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The president said: “This government will not raise interest rates, it will lower them,” the central bank has kept the policy rate at 14 percent, but with secret steps, lending rates have been significantly increased in recent weeks.

President Erdoğan said in a statement two weeks ago that “This government will not raise the interest rate, on the contrary, we will continue to reduce interest rates”, but recently there have been developments that contradict this claim.

The Central Bank (CBRT), which kept the benchmark rate unchanged at 14 percent yesterday, as it did in the last five meetings, has made decisions that indirectly raise interest rates on loans in the last period.

RAPID INCREASE IN COMMERCIAL LOAN INTERESTS

According to CBRT data, Average interest rates on commercial loans have risen nearly 700 basis points from 20.35% to 27.09% in the past two months. In the week of June 10-17, the rise in commercial lending rates approached 250 basis points.

Average interest rates on consumer loans also increased from 27.21% to 31.82%, with an increase of more than 450 basis points in the past two months.

HERE ARE THE REASONS

Experienced banker Kerim Rota pointed out that the CBRT has recently taken steps that mean a covert rate hike.

Recalling that the discount rate for bonds indexed to consumer inflation (CPI) was raised to 30 percent with the June 6 CBRT decision, Rota“Banks had the opportunity to borrow nearly the same amount of 14% interest from the CBRT for their CPI-indexed bonds, worth $ 1.1 trillion. However, with the decision of 6 June, this opportunity disappeared for nearly TL 330 billion of these bonds. “

As a second factor in raising interest rates on loans Calling attention to the June 14 CBRT decision, Rota recalled that banks impose a maturity requirement of 5 years or more for Turkish lira bonds to be held for their foreign currency liabilities, and this step means that around TL 300 billion of bonds cannot be used in repurchase agreements for banks, which claimed to be effective in raising interest rates on loans, especially creating a liquidity problem in private banks.

INTEREST ON THE LOAN WILL INCREASE FURTHER

Path, He warned that other steps, including the introduction of reserve requirements at the rate of 10 percent and then 20 percent, for commercial cash loans denominated in Turkish lira, were also effective in raising lending rates and that there could be a 5-6 point increase in loan rates over the next 2-3 weeks.

Rota said private banks have been hit hardest by discounts on CPI-indexed bonds and the requirement to hold long-term bonds, and that private banks have raised lending rates more than public banks.

Rota pointed out that, despite the increases in recent weeks, lending rates are still far below the inflation rate and that indirect increases in interest rates will not replace the tightening to be implemented by raising the official rate and their effect. on the reduction of inflation will be weak.

BASIS OF REQUEST AND REASON FOR THE RISK CONCERNED

Hakan Kara, former CBRT chief economistHe said there are two major reasons for the rise in commercial lending rates.

“First, the CBRT they have significantly increased the cost of reserve requirements for some sectors”Said prof. Dr. Nero, “The second is that the BRSA has increased the credit risk weights for the same sectors. In other words, the cost of commercial loans from banks has increased significantly. Banks also reflected these costs for companies.

‘MARGINAL MEASURES TO RETAIN CREDITS’

Pointing out that the CBRT and economic institutions have used marginal measures to support the lira and curb credit growth, the ultra-accommodative stance in monetary policy has recently been maintained, Tera Investment Chief Economist Enver Erkan pointed to the text of the CBRT decision published after the Monetary Policy Committee (PPK) met yesterday and said: “The MPC. It has been seen that such regulations will continue under the guidance of macroprudential liraization measures, which is stated in the text, and President Erdoğan’s assessments that interest rates should not be raised. “

In this context, Erkan said that the basic elements of the entire CBRT toolkit were not activated and other refinement measures were used. “Although economic institutions are looking for uninteresting measures and ways, we believe that the effects of these measures are mostly cosmetic rather than changing the main perspective.” made his assessment.

LIMITED INCREASE IN SECURITY INTEREST

On the other hand, average interest rates on TL deposits for up to 3 months have increased by 150 basis points from 17.09% to 18.55% over the past two months.

The average interest rate on deposits with a maturity of up to one month increased slightly from 15.03 percent to 15.66 percent over this period.

Spokesperson / Emre Deveci

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