Türkiye’s investment fund market remains sound despite investigations, fund liquidations: Central Bank governor

Türkiye’s investment fund market continues to function soundly despite current investigations and the liquidation of some funds, with no problem affecting the broader financial system, the nation’s Central Bank governor said Tuesday.

Speaking to lawmakers at parliament’s Planning and Budget Committee, Fatih Karahan said the volatility had been concentrated in individual funds within a limited segment of financial markets.

“We assess that the fund market overall continues to function soundly and that there is no problem affecting the financial system as a whole,” he said.

The Central Bank increased repo auction amounts, raised banks’ borrowing limits tenfold, eased collateral requirements, and accelerated bond purchases to contain spillovers.

“We will continue to take the necessary steps depending on market conditions,” he said.

– Fund outflows slow

Karahan said substantial fund withdrawals since Aug. 28 had partly shifted into bank deposits, with commercial and savings deposits rising by more than 800 billion Turkish liras ($16.3 billion).

Including investment funds, the Turkish lira’s share remained stable at around 61%-61.4%, while fund withdrawals recently slowed.

Three investment banks whose shareholder rights were transferred to the Savings Deposit Insurance Fund represented just 0.2% of the banking sector, he said, adding that no systemic risk is currently expected.

– Supply shocks prolong tight policy

Karahan said inflation’s decline from 75% to the 30% range shows progress, although the targeted level has yet to be reached.

Persistent rent and education inflation, slower monetary policy transmission, and food and energy supply shocks required interest rates to remain high for longer, he said.

Acknowledging costs for workers, businesses, and public finances, he said low and predictable inflation is essential.

“Disinflation is being pursued not to impose costs on Türkiye, but because it is the only lasting solution to the problems being experienced today,” he said.