Turkey’s Banking Data Shows Decline in Deposits as KKM Accounts Shrink Further

Turkey’s banking sector saw mixed movements last week, according to the latest data from the Banking Regulation and Supervision Agency (BDDK). While overall credit volume saw modest gains in several categories, total deposits fell, and the ongoing decline in Foreign Exchange-Protected Deposit (KKM) accounts remained one of the most notable trends.

The weekly report shows that the financial system continues to adjust as households and businesses move away from KKM products. At the same time, credit dynamics and asset structures evolve in response to changing economic conditions.

KKM Accounts Record Sharp Decline

The BDDK data indicates that Turkish Lira–based KKM and participation accounts decreased to 22.46 billion TL, marking a weekly drop of 30.32 billion TL. This continued decline aligns with the broader policy shift to reduce the share of KKM in the financial system, which authorities have gradually unwound through regulatory adjustments and incentives favoring standard deposit products.

The rapid contraction of KKM reflects both currency stabilization efforts and a strategic redirection of savings toward traditional deposit instruments.

Total Deposits Contract Slightly

The banking sector’s overall deposit base declined slightly, from 25.78 trillion TL to 25.68 trillion TL. Although the decrease is modest, it marks a continuation of recent fluctuations in deposit behavior amid changing interest rate dynamics and shifting market expectations.

Deposit trends are closely monitored because they influence banks’ liquidity positions, funding structures, and their ability to extend credit. The current softening suggests that savers may be reallocating funds or adjusting positions in response to financial tightening.

Credit Growth Remains Mostly Stable

While total loans edged slightly lower—declining from 21.85 trillion TL to 21.84 trillion TL—the overall picture shows that credit activity remains broadly stable. However, a closer look at individual loan categories reveals substantial differences.

Key credit movements include:

• Consumer loans increased from 2.75 trillion TL to 2.76 trillion TL, signaling continued household demand.

• Commercial and other loans rose from 16.48 trillion TL to 16.51 trillion TL, reflecting steady business borrowing.

• Installment-based commercial loans climbed from 3.25 trillion TL to 3.26 trillion TL, showing consistent growth.

• Individual credit card balances fell from 2.62 trillion TL to 2.58 trillion TL, likely influenced by repayment behavior and spending patterns.

• Corporate credit card debt increased from 767.61 billion TL to 779.53 billion TL, suggesting resilient commercial expenditure.

These mixed movements illustrate a balanced environment in which loan demand continues but varies across consumer and corporate segments.

Non-Performing Loans Edge Higher

The volume of non-performing loans (NPLs) rose from 545.03 billion TL to 548.56 billion TL. Although the increase is moderate, the upward trajectory remains an important indicator of financial stress among some borrowers. Banks typically respond to rising NPLs with tighter credit standards or additional provisions to protect balance-sheet health.

Securities Holdings Increase

The amount of securities held by banks expanded notably:

• Securities kept on balance sheets increased from 3.39 trillion TL to 3.53 trillion TL.

• Total securities, including off-balance-sheet holdings, rose from 6.87 trillion TL to 6.90 trillion TL.

This growth underscores the banking sector’s continued reliance on government bonds and other financial instruments, often used for liquidity management and regulatory requirements.

Foreign Currency Position Exhibits Divergent Trends

The weekly data also reveals meaningful shifts in foreign currency exposure:

• The on-balance-sheet foreign currency position fell further into negative territory, sliding from –1.84 trillion TL to –1.93 trillion TL.

• The off-balance-sheet foreign currency position increased from 1.90 trillion TL to 1.98 trillion TL, indicating higher use of derivatives or other hedging instruments.

• The net general FX position, which measures overall foreign currency exposure, decreased from 63.05 billion TL to 52.98 billion TL.

These changes suggest that banks are adjusting FX structures, possibly in response to exchange-rate expectations, risk management strategies or regulatory requirements.

Regulatory Capital Strengthens

One of the positive developments in the weekly data is the continued growth in legal (regulatory) capital, which increased from 4.72 trillion TL to 4.81 trillion TL. Strong capital buffers help banks absorb potential losses, maintain lending capacity and support overall stability in the financial system.