UPDATE 2-Turkey to sell foreign currency bonds to individual investors

(Recasts with Treasury statement)

ISTANBUL, Dec 12 (Reuters) - Turkey will issue foreign currency bonds to individual investors from next week, its Treasury said on Wednesday, a move aimed at broadening the government’s funding and tapping into money that is sitting in bank accounts.

It was not clear how this fits with President Tayyip Erdogan’s call for Turks to convert their foreign currency and gold savings into lira to prop up the currency. Erdogan has cast the lira’s sell-off as an attack on the economy.

The Turkish Treasury said it would start issuing the euro and U.S. dollar-denominated bonds next week to “diversify borrowing instruments and to broaden the investor base”.

A currency crisis this year has seen the lira fall as much as 47 percent against the U.S. dollar, before recovering some losses. It is now down around 30 percent year-to-date. The crisis was sparked by investor concerns about the central bank’s independence and a diplomatic rift with the United States.

“In recent years, volatility has caused serious concerns for local investors. Investments have shifted to deposits. We need to mobilise those investors, those balance sheets,” Finance Minister Berat Albayrak said in a speech in Istanbul.

The bonds will have a maturity of one year and a coupon period of six months, the Treasury said, adding that the demand for the securities will be collected through intermediary banks, including state lender Halkbank, Is Bank, Akbank and others.

Total bank deposits increased by more than 20 percent to 2.11 trillion lira ($391.90 billion) as of November from the end of last year, according to data from the banking watchdog.

Economists are still worried about the impact from the crisis on Turkish banks and the broader economy and Albayrak said the economy was entering a period where the top priority was development and growth. ($1 = 5.3840 liras) (Reporting by Ceyda Caglayan and Ezgi Erkoyun; Additional reporting by Tuvan Gumrukcu; Editing by David Dolan and Alexander Smith)