Turkish central bank to support FX deposit conversion to lira deposits

FILE PHOTO:A money changer counts U.S. dollar bills, with Turkish lira banknotes in the background, at an currency exchange office in central Istanbul, Turkey, August 21, 2015. REUTERS/Murad Sezer

ISTANBUL, Dec 21 (Reuters) - The Turkish central bank said on Tuesday it has decided to support foreign currency deposit accounts converted to lira deposit accounts in a move to encourage reverse dollarization.

"In the event that resident real persons, who already had an FX deposit account ... convert their accounts into Turkish lira time deposit accounts will be eligible to benefit from the incentive," the central bank said.

In a statement, the central bank also said it will cover the gap after interest rate and exchange rate difference at the opening and closing of lira deposit accounts are calculated. The account owner will be paid whichever is the highest, it said.

The accounts that are converted to lira deposit accounts can have three, six or 12-month maturities, the central bank said.

Turkey's lira, which hit a series of record lows in recent days, rocketed back in volatile trading on Tuesday after Turkish President Tayyip Erdogan proposed measures to protect local currency savings against such swings. read more

More than half of locals' savings is in foreign currencies and gold, according to central bank data, due to a loss of confidence in the lira after years of depreciation.

The currency has plunged to record lows this year over fears of an inflationary spiral brought on by Erdogan's push for monetary easing. At its low, it was down some 60% on the year.

According to an entry in the official gazette, the one-time support will also include the central bank purchasing the foreign currency during the conversion of deposit accounts in U.S. dollar, euro and pounds.

Writing by Ezgi Erkoyun in Istanbul Editing by David Gregorio and Matthew Lewis

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