According to the news in Reuters, the massive redemption period of up to $30 billion in corporate-sourced deposits in exchange-protected deposits (KKM) was completed before the demand for foreign exchange, which the market was worried about, was completed, while the introduction of a cost-effective loan system against KKM also supported the process.
The cost of KKM is increasing day by day, but the practices and the statements of the authorities show that the KKM system will continue, at least for the next year, perhaps longer, with no alternative.
The redemptions are at relatively low amounts until next year, as of the end of the month, after this heavy redemption of KKM, which is under the responsibility of the Central Bank (CBRT) as the majority of it is composed of the corporate returning from foreign currency.
Monday 3, Tuesday 4, 18 this month, 3 billion dollars return in September, after massive redemptions of 30 billion dollars in the last two months. Since the maturity is 6 months, until the end of the year, actually until February next year, the return amounts are quite low.
Many analysts and bankers in the market had the risk and concern that there might be a demand for foreign currency at a level that the CBRT might not be able to meet in heavy KKM returns. Two main risk factors have been creating pressure and anxiety in the markets for months that the foreign exchange may not be sufficient due to summer KKM redemptions and winter energy bills.
Despite these concerns, the total amount of KKM rose to 1.2 trillion TL. Even the fact that KKM does not fall in TL means that there is no foreign exchange demand that could disrupt the market due to redemptions.
KKM has costs to the Treasury and the CBRT through two separate channels. The reason for this is that the accounts opened in TL by converting from Treasury foreign currency to TL are under the responsibility of the CBRT. The cost to the Treasury was 23 billion TL in July and 60 billion TL this year. No explanation or data sharing has been made yet for the cost to the CBRT. 40 billion TL was allocated for KKM with the additional budget, but this amount was exceeded instantly.
A source with knowledge on the subject “The cost of KKM has exceeded 60 billion liras and will continue to increase. It is a heavy cost, but in the current situation it has to be borne. Currently, it is requested that the KKM in banks be at the level of 20 percent of the total DTH” said and added:
“The costs are high, but if this money goes to foreign currency, bigger problems will have to be faced. If a different application or policy is possible, it would be preferable, but it will continue like this for a while. At least it will be like this until the New Year.”
LOAN AGAINST KKM STARTED
According to the information provided by bankers, companies and officials, companies were given access to 14-20% cheap loans with KKM collateral converting from foreign currency to TL at the end of the redemption period. The new loan, which came at a time when complaints about access to loans and interest rate cuts were received, supported the renewal of KKM returns. Companies are showing interest in related loans by drawing attention to the tax and loan cost advantage.
The owner of a company operating in the field of import and export said, “It is not easy to get loans from banks anymore. Currently, commercial interest rates are at the lowest 37% and 40%. We changed a deposit of more than 10 million dollars in the bank for a while and opened a KKM account last week. Because if we change the foreign currency and deposit it in a public bank, we get the same commercial loan at 18.5%. We pay exactly half the interest,” he said.
“For the last week, I have heard that other companies have started to exchange foreign currency due to this opportunity. I think it is highly likely that we will see foreign currency sales and the increase in KKM from here in the following weeks. I am almost sure.”
According to the information given by the bankers, public banks provide the relevant loans in the 14-19% band, while some private banks provide less than 20%. KKM uses the amount converted from foreign currency to TL as collateral for loans.
Slight LAUNCHING ON SELECTIVE LOAN LIMITATION
With the loan against KKM step, a limited step was taken in terms of directing the loans to the desired areas. Although the foreign currency exchange requirement in cheap loans is fulfilled in KKM, bankers state that there is no definition of net export in loans against KKM.
On the other hand, interest rate cuts were also realized in the same period, and the CBRT gave the message that it would take steps to bring loans closer to the policy rate.
The government states that it will reduce inflation later with a policy focused on the current account surplus. In this context, while net export-oriented loans that foresee foreign exchange sales are priced close to the policy rate; similar corporate loans cost close to 40%, while individual loans cost around 50%. Although there are some exceptions to these loan cost generalizations, net export-oriented loans are provided at a much lower cost under current policy. In the process, representatives of the business world and the Central Bank criticized each other very harshly.
INSTITUTIONS PREFER LOAN AGAINST KKM
An official informing Reuters, “Some of the institutions continued to prefer taking loans instead of using their KKM deposits to create the liquidity they needed in TL” said.
The economy management sees KKM as an important tool for solving problems, but also wants the amount in KKM to be used for needs such as payment of investments in TL and to complete its function in this way over time. In this way, although the goal of transferring more resources to selective areas in the economy is considered, the fact that the demands of the companies are not exactly in the same direction complicates the practices.
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