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Turkish central bank revises reserve requirement regulation

Turkey's central bank said it will make changes to reserve requirements for banks, linking reserve requirement rations and remuneration rates to loan growth rates in order to encourage productive long-term commercial loans.

It will consider the real change in Turkish lira cash loans in the calculation of loan growth.

In calculating the real annual growth rate of loans, the Turkish central bank will take into account the last three-month average of the real cash loan stock values, minus loans given to financial institutions.

The real cash loan value will be computed by dividing the nominal loan amount by the Consumer Prices Index in the relevant period.

Banks will be able to get reserve requirement incentives if their real loan growth rates meet certain conditions.

The central bank said "long-term commercial loans that have a strong relation with production and investment, and long-term housing loans that have a weak relation with imports will be encouraged."

The regulator expects the ongoing favorable outlook of loan supply and demand to continue in 2020. It also expects that loan growth will be mainly propelled by Turkish lira loans and will be consistent with the inflation target and growth projections for 2020.