Deposit Account with Deposit Insurance

Foreign Exchange Protected Deposit Account (FPDA) is a monetary policy instrument introduced by the Central Bank of the Republic of Türkiye (CBRT) on 21 December 2021, designed to protect Turkish lira term deposits against fluctuations in foreign exchange rates. The system aims to limit capital flight to foreign currencies by guaranteeing the value of Turkish lira deposits against currency appreciation, support the liraization process, and strengthen macroeconomic stability.

Following the global financial crisis of 2008, central banks began implementing macroprudential policies alongside traditional monetary tools to safeguard financial stability. In Türkiye, exchange rate volatility in 2018 and the acceleration of inflation after the COVID-19 pandemic contributed to rising macroeconomic vulnerabilities.

On the basis of an announcement made by President Recep Tayyip Erdoğan following a Cabinet meeting, the Foreign Exchange Protected Turkish Lira Term Deposit product was officially announced to the public on 21 December 2021 by the Ministry of Treasury and Finance and published in the Official Gazette.

The core objectives of the system are as follows:

• Limit demand for foreign currency and curb exchange rate increases,
• Encourage preference for assets denominated in Turkish lira,
• Extend deposit maturities in the banking sector,
• Strengthen foreign exchange reserves,
• Support the liraization process and price stability.

The legal basis for the Foreign Exchange Protected Deposit is established under Law No. 1211 on the Central Bank of the Republic of Türkiye and Law No. 5411 on Banking.

In the initial announcement, it was stipulated that domestic resident individuals could convert their foreign currency demand deposits and foreign currency participation funds into Turkish lira term deposits and participation accounts. The conversion rate for foreign currency demand deposits was determined by the CBRT, and at maturity, this rate was compared with the maturity exchange rate. If the exchange rate difference exceeded the interest or profit share, the CBRT covered the difference.

The CBRT also gained authority to set minimum and maximum interest rates and established the procedures and principles for participation banking.

The Foreign Exchange Protected Deposit system is a specialized deposit product designed to protect domestic resident individuals and legal entities against foreign exchange rate fluctuations. It was implemented according to principles set by the CBRT and the Ministry of Treasury and Finance, covering both Turkish lira-denominated deposits and deposits converted from foreign currency.

• Accounts opened from Turkish lira deposits: Existing Turkish lira deposits held by individuals could be included in the system. At maturity, principal, interest, and any exchange rate difference were paid in Turkish lira.
• Accounts converted from foreign currency: As of 31 August 2024, foreign currency demand deposits or foreign currency participation funds held in banks in US dollars, euros, and British pounds could be converted into Turkish lira at the conversion rate upon request. Upon maturity, these accounts could be redeemed in foreign currency if requested. Interest and exchange rate differences for these accounts were paid in Turkish lira.

Accounts could be opened with maturities of 3, 6, 9, and 12 months. The minimum interest rate was set at the CBRT policy rate. For participation banking accounts, returns were calculated based on the profit-sharing principle. The CBRT had the authority to determine the minimum and maximum interest rates banks could apply, and it also defined the parameters for returns in participation accounts.

The core mechanism of the system is based on comparing the deposit interest rate with the change in the foreign exchange rate at maturity.

• If the interest return was higher, the account holder received payment based on the interest rate.
• If the foreign exchange rate increase exceeded the interest rate, the CBRT compensated the difference and transferred it to the account in Turkish lira.

For exchange rate difference calculations, the CBRT published the USD foreign exchange buying rate daily at 11:00. The conversion rate and maturity rate were determined based on this data.

For accounts opened for individuals, the withholding tax rate was set at 0%. Various exemptions were defined for corporate tax purposes.

All banks were eligible to participate in the system. Existing Turkish lira term deposits could also be included in the Foreign Exchange Protected Deposit scheme upon the depositor’s request to the bank. If funds were withdrawn before maturity, the account reverted to a demand deposit, forfeiting any interest entitlement and eliminating eligibility for exchange rate difference payments from the Central Bank of the Republic of Türkiye. Additionally, balance updates were calculated based on the lower of the CBRT’s foreign exchange buying rates on the account opening and closing dates. Necessary technical infrastructure work was completed to integrate participation banking into the system, and participation banks were subsequently included in the application.

Key criticisms of the Foreign Exchange Protected Deposit implementation include:

• Creation of publicly visible and high-cost obligations,
• Loss of value for savings in a negative real interest rate environment,
• Weakening of medium- and long-term funding,
• Reduced predictability in the economy,
• Increased dollarization through the indexing of national savings to foreign currency,
• Elevated vulnerability to external shocks due to declining reserves.

As of 23 August 2025, the Central Bank of the Republic of Türkiye ceased all new account openings and renewals for Foreign Exchange Protected Deposit accounts. This decision took effect through amendments published in the Official Gazette to the following announcements: Announcement on Supporting the Conversion of Turkish Lira Deposits and Participation Accounts (2021/14), Announcement on Supporting the Conversion of Gold Accounts into Turkish Lira Deposits and Participation Accounts (2021/16), and Announcement on Integrating Physical Assets Denominated in Gold into the Financial System (2022/11).

Pursuant to this decision, as of 23 August 2025, new account openings and renewals for Foreign Exchange Protected Deposit accounts were halted, except for YUVAM accounts. Previously opened accounts will be closed upon maturity, and the relevant regulations will be repealed.

In its 2025 Monetary Policy Text, the CBRT formally defined the exit from the Foreign Exchange Protected Deposit as a policy objective and assessed the process as a “simplification step” within the macroprudential framework.

The system’s volume reached its peak in August 2023, exceeding 140 billion US dollars, and by mid-2025 had declined to approximately 11 billion dollars.