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Banks embracing inflation accounting by 2025.

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TLDR:

  • Türkiye’s banks and financial institutions will switch to inflation-adjusted accounting starting on January 1, 2025.
  • Inflation accounting incorporates high inflation into the financial statements of businesses, shielding them from higher taxes.
  • Interest rates on 3-month deposits in Türkiye have fallen, while interest rates on personal loans have increased.

Türkiye’s banks and other financial institutions will start applying inflation-adjusted accounting from January 1, 2025, according to the country’s Banking Regulation and Supervision Agency (BDDK). This decision aims to shield companies from higher taxes by incorporating high inflation into their financial statements. Non-financial companies will also be required to apply inflation accounting from the end of 2023 to 2026.

Recent data from Türkiye’s Central Bank shows that the interest rates offered by local lenders on 3-month deposits have been on the decline, dropping from 52% in December to 51.29% in the first week of January. However, the average interest rate on personal loans has climbed to 63.42%, compared to 24.24% in the first week of 2023. The increase in personal loan interest rates can be attributed to the Central Bank’s policy rate hikes, which raised the rate by 3,400 basis points from 8.5% to 42.5% between June and December.

Additionally, interest rates on car loans have started to pick up again. From mid-November, rates dropped from 46% to 33.3% in the first week of December but climbed back to 36.1% as of January 5. These fluctuations reflect changes in the Central Bank’s interest rate policies.

In conclusion, the switch to inflation-adjusted accounting for Türkiye’s banks and financial institutions is expected to protect businesses from higher taxes. However, the increase in personal loan interest rates and the fluctuating rates for car loans point to the impact of the Central Bank’s policy rate hikes.

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