Central Bank terminates FX-protected deposit scheme
ANKARA
The Central Bank of Türkiye has decided to terminate the opening and renewal of FX-protected deposits (KKM) effective Aug. 23, 2025 — a move Finance Minister Mehmet Şimşek says will further strengthen financial stability.
“We have achieved another key objective in our economic program,” Şimşek wrote on Twitter.
The KKM balance, which peaked at 3.4 trillion Turkish Liras ($143 billion), has steadily declined for two years, falling to 441 billion liras as of Aug. 15, he noted.
“With the termination of KKM, which was a significant contingent liability, financial stability will be further strengthened,” Şimşek said.
In December 2021, Türkiye announced the KKM scheme to protect the lira's value against foreign currency fluctuations.
"Accounts opened prior to this date will remain valid until their maturity, following which the relevant communiqués will be repealed," the bank announced in the statement released on Aug. 23.
The total target for KKM accounts’ transition to the lira and renewals has been abolished, it added.
Declining exchange rate volatility, which is a key determinant of depositors' preference for KKM, widened the yield spread between KKM and liras deposits in favor of lira, said analysts at the Central Bank in a study on the exit from the scheme.
“Moreover, the decline in the underlying trend of inflation and the attractiveness of the lira deposits further support the exit from the KKM scheme,” they added.
Over the last two years, KKM balance has gradually declined, they said.
During this period, macroprudential tools such as targets for renewal and transition to the lira as well as lira share targets, reserve requirement (RR) ratios, RR remunerations and minimum interest rates charged on KKM accounts were actively used, the analysts explained.
In addition, the minimum interest rate applicable to KKM accounts was gradually lowered, and the withholding tax advantage on KKM accounts was terminated, they said.
"Under the tight monetary policy stance, these complementary steps supported the attractiveness of TRY deposits and limited the shift towards FX from the KKM accounts,” they noted.
As of Aug. 19, 2025, the KKM share declined to 1.8 percent, while the liras deposit share rose above 60 percent, according to the study.
The gradual phasing out and eventual termination of the KKM accounts strengthened the pass-through from monetary policy to banks’ funding costs while reducing the risks on the bank’s balance sheet, they said.
