The Central Bank of the Republic of Turkey (TCMB) announced its final decision regarding the Currency Protected Deposit accounts.

The Central Bank of the Republic of Turkey (CBRT) has decided to terminate the opening and renewal processes of Foreign Currency Protected Deposit and Participation Accounts (KKM) with maturities of 6 and 12 months as of today.

A press release regarding Foreign Currency Protected Deposit accounts has been published on the CBRT's website. In the announcement, it was stated that the maturity periods for opening and renewal processes have been restricted within the framework of the exit strategy from Foreign Currency Protected Deposit accounts, and it was expressed that "The Central Bank of the Republic of Turkey has decided to terminate the opening and renewal processes of foreign currency and gold convertible foreign currency protected deposit and participation accounts with maturities of 6 and 12 months as of January 20, 2025. This is presented to the public's information."

WHAT IS KKM?

The Foreign Currency Protected Deposit (KKM) system was implemented in December 2021 to control the sudden rise in exchange rates. With this system, a promise of protection against foreign currency was given to deposits in TL, aiming to encourage conversion to the lira.

If the change in the exchange rate exceeds the deposit interest, the difference was covered by the Treasury or the Central Bank. Initially, it was aimed to reduce the demand for foreign currency with KKM and to increase the value of the TL. However, the cost of the system has created a significant burden on the Treasury and the Central Bank as exchange rates continued to rise.

MEHMET ŞİMŞEK WANTED IT REMOVED

As of 2023, the budgetary cost of KKM has reached hundreds of billions of lira, creating serious pressure on public finances. After the elections on May 14, 2023, Mehmet Şimşek, who took the economic seat, stated that KKM carries risks and that they plan to remove it in the long term.

In June, Central Bank President Fatih Karahan stated, "The loss from KKM is 833 billion lira." When KKM was first introduced, its total size was at the level of 459 billion 230 million dollars. According to the Banking Regulation and Supervision Agency (BRSA) data, the size of KKM reached a record level of 3 trillion 407 billion TL on August 18. However, with the policies of the new economic management, a decrease was achieved, and as of December 13, the size of KKM fell to 1 trillion 169 billion TL.