Turkey under no pressure to repatriate gold – central bank

Otmane El Rhazi from The Bullion Desk.

Turkey’s central bank is under no pressure to repatriate its gold reserves from the US Federal Reserve or the Bank of England, its executive director of markets said.

The country currently holds a portion of its 510.3 tonnes of reserves in the vaults of both the Fed and the BoE, Erkan Kilimci of the Central Bank of the Republic of Turkey (CBRT) told delegates at the Dubai Precious Metals Conference here.

Many countries are under political pressure to bring gold back from the traditional sources that hold other countries’ official reserves – the Netherlands and Germany most recently repatriated gold from the Fed – but no such pressure exists in Turkey, he said.

“We do not have any pressure on us at the moment [to repatriate reserves]“, he said. “Having our gold kept in traditional centres has a value in terms of liquidity, which is key to the reserve management.”

Turkey’s reserves include a large portion of gold that is held by the country’s banks through a policy called Reserve Option Mechanism (ROM) that allows commercial banks to hold up to 30 percent of their statutory reserves in gold and foreign currencies.

That scheme, which is widely regarded to have been a success, taps into the large amount of wealth held by Turkish citizens in the form of physical gold, estimated to be more than 3,000 tonnes.

The policy theoretically reduces volatility in the Turkish exchange rate, reduces the impact of foreign currency inflows and reduces the cost of banks meeting reserve requirements. By doing so, it also encourages banks to buy up gold while also allowing private citizens to deposit their gold with banks, which is ultimately transferred to the central bank’s balance sheet.

Since its implication in 2011, domestic reserves have risen to the current level of 510.3 tonnes from around 175 tonnes, Kilimci said.

Most of the gold held officially by the central bank is understood to be stored abroad.

“Whenever you have gold that is easily reachable and liquidated, then it is false in the true meaning of ‘international reserves’,” he said.

(Editing by Mark Shaw)

The post Turkey under no pressure to repatriate gold – central bank appeared first on The Bullion Desk.