(Adds AKP comment, details of proposed law)
ISTANBUL, July 8 (Reuters) - Turkish President Tayyip Erdogan’s AK Party is proposing changes in the central bank’s legal reserves ratios, party official Mehmet Mus said on Monday, to bring the level in line with trade law.
“We are making (central bank) legal reserves comply with Turkish trade law. We are proposing that legal reserves be 10% of profits after necessary deductions are made,” Mus said.
The current level is 20% of profits.
In June, Reuters reported that the Turkish government revived its plans to transfer the central bank’s 46 billion lira ($8 billion) in legal reserves to its deteriorating budget to narrow the deficit.
“The implementation of 20% legal reserves from central bank profits will cease, the accumulated amount under this item, 40-46 billion lira, will be transferred to the treasury,” a senior AKP official told Reuters.
The legal reserves, which are separate from the central bank’s foreign exchange reserves, are what the central bank sets aside from profits by law to be used in extraordinary circumstances.
In January, the central bank transferred some 37 billion lira ($6.46 billion) in profits to the Treasury three months earlier than scheduled.
The details of the proposed law said 10% of central bank profits will be set aside as legal reserves in line with Turkish trade law, while the accumulated amount from previous years will be included into profits and distributed to shareholders, which includes the Treasury.
Speaking to reporters, Mus also said the proposed amendment to the law will authorise the central bank to determine required reserves in terms of assets.
“In terms of required reserves we are proposing to give certain authority to the central bank to determine the amount of required reserves by taking into account assets not only liabilities,” Mus said. ($1 = 5.7283 liras) (Reporting by Behiye Selin Taner and Orhan Coskun; Writing by Ezgi Erkoyun; Editing by Daren Butler and Raissa Kasolowsky)