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Turkey curbs bank lending


Turkey curbs bank lending


Turkey’s government has told the country’s banks that they must increase the amount of money in their reserves.

The proportion of deposits that banks must hold rather than lend has gone up from 10 to 11 percent for foreign currencies and from five to 5.5 percent for Turkish lira deposits.

That should withdraw around 2.25 billion euros of spare cash from the economy – extra stimulus money that was pumped in during the financial crisis.

The move was widely expected, but has come earlier than many had forecast.

In response bank shares fell sharply and the lira dropped briefly before recovering.

Global institutions including the IMF and OECD have urged the central bank to unwind stimulus as Turkey recovers quicker than most of its peers.

The economy there contracted by 4.7 percent in 2009. It is expected to grow by six to seven percent this year.

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