WITH Turkish pound already at levels below 19 pounds per dollar and under pressure, h Bank of Turkey imposes new rules on banks in a neighboring country, perhaps more aggressive than ever. Once again, the clear purpose of the new rules, which add to the avalanche of bans and obligations, is to force banks in the neighboring country not to hold foreign currency deposits.

Thus, from now on, if a Turkish bank does not have at least 60% of its deposits in Turkish lira, will be required to keep most of its foreign exchange reserves in the central bank’s treasury. In addition, when the bank’s Turkish lira deposits fall below 60% of the total, the bank will be forced to buy more government bonds in Turkish currency.

When, on the contrary, the bank’s deposits in Turkish Lira are at least 60% of the amount or more, then the Bank of Turkey will be able to release it from the obligation to hold a certain amount and type of government bonds in Turkish currency.

Expanding the use of local currency in bank deposits is the cornerstone of the central bank’s strategy. The figures showed that 59.2% of all bank deposits were in pounds at the end of last month.

In order not to keep deposits in foreign currency – the pound is under pressure.

The lira has come under pressure again in recent weeks as analysts at banking giants such as HSBC and Morgan Stanley discount the Turkish currency’s sharp fall after next month’s general election.

And as the neighboring country approaches elections in May, currency traders believe the outcome of those elections will be critical to shaping Turkey’s monetary and fiscal policy going forward.

The unorthodox policies that Turkish President Tayyip Erdogan has imposed on both the banks and the country’s central bank, which is essentially acting on his constant orders, preceded by years.

The essence of this absurd policy is to keep the cost of borrowing low in order to promote growth and ensure Erdogan’s popularity.