Turkey has seen recent developments in the use of gold deposit accounts. The Central Bank of Turkey allowed banks to hold a fraction of their reserve requirements in gold and foreign currencies. Banks fully utilized this option, holding gold instead of Turkish lira. As a result, gold deposit accounts increased substantially, bringing physical gold into the financial system and increasing Turkey's international gold reserves. Gold deposit accounts and "golden days" where banks collect physical gold from customers have proven effective at integrating gold back into the Turkish economy.

1. RECENT DEVELOPMENTS IN GOLD
DEPOSIT ACCOUNTS IN TURKEY
Erkan Kilimci, Executive Director
Central Bank of the Republic of Turkey
22 August 201522 August 2015

2. Physical gold is a traditional investment for Turkish
people.p p
Traditional Demand for Gold
2
Source: Turkish State Mint Source: Turkish Statistical Institute Last Observation : 2014Last Observation : July 2015

3. Sustained high level of inflation for years induced
households to hold gold.g
Inflation Rate
(CPI YoY, %)
3
Last Observation : June 2015Source: CBRT, Bloomberg

4. Gold served as a safe investment under frequent and
sharp FX fluctuations.p
(% Change since 30/06/2000)
Gold and USD Return
4
Last Observation : April, 2015Source: Bloomberg

5. As the economy prosper gold become available for many.
GDP Per-Capita
(USD)
Last Observation : 2014Source: World Bank, Bloomberg
5

6. Turkey covers its domestic demand and some of its
export production with imports.
Jewellery Trade
(Million USD)
6
Last Observation : June 2015Source: Turkish Statistical İnstitute

7. Turkey has a fair amount of gold demand.
Gold DemandGold Demand
(in tonnes)
7
Last Observation : March 2015Source: Reuters

8. Mining and recycled gold reserves are not enough to
meet the demand for gold.
Turkish Recycled Gold Reserves
(in tonnes)
8
Last Observation : 2013Source: World Gold Council

9. Turkey accumulated physical gold for long years.
Net Accumulation
(Cumulative in Tonnes)
İ
9
Last Observation : May 2015
Source: Turkish Statistical İnstitute

10. On the other hand Turkey like many other emerging
economies suffers from low levels of savings.
Last Observation 2014
Source: IMF, Bloomberg
EM countries : S.Africa, Hungary, Brazil, Argentina, Colombia, Chile, Mexico; Czech Rep. , Poland
10

11. Financial inclusion policies should target the unbanked
women population.
Account Penetration
(Share Without any Bank Account, Women)
11
Last Observation : 2014Source: Global Findex Database, World Bank.

12. Reserve Option Mechanism in Turkey
12

13. CBRT allowed banks to hold a fraction of their reserve
requirements for TL liabilities in gold and FX.
100TL RR 60% 99TL in FX 38,1 USD
If ROM utilized at max
30% 43,5TL in Gold 0,4 gr
10% 10TL 10,0 TL
13
Last Observation : May 2015Source: BRSA

14. Banks fully utilized the option to hold Gold instead of
Turkish Lira.
FX and Gold
ROM Utilization Rate
(%)( )
14
Source: CBRT Last Observation : June 2015

15. Banks use «golden days» to collect gold.
Golden Days
Regulatory
Bodies
CBRT-BRSA
Banks’
Storage
AccountsPh i l Banks’
Branches
AccountsPhysical
Gold
Experts
Refineries
15
Source: CBRT Experts

16. Gold accounts and transactions are regulated.
Gold AccountsGold Accounts
• Accounts can consist of at least 995/1000 pure bar and ingot of raw golds.
A t b ti d it d d d it• Accounts can be open as time deposit or demand deposit
• Bankbooks are given to customers.
• Interest payments can be done via TL, FX or gold.
• Bank can buy golds from the customers by paying TL or FX.
• Customer can withdraw in TL or gold ingot.
16

17. Golden days practice stands as a simple yet effective
way of bringing gold back in the economy.
Collected Gold in the
Golden Days
(Tonnes)
17
Last Observation : July 2015
Source: Istanbul Gold Refinery

18. Gold deposit accounts increased substantially by pulling
physical gold in to the financial system.
Gold Deposits
Reserve Option
Mechanism Introduced
18
Source: CBRT Last Observation : June 2015

19. Once people used to gold accounts it is easier for them
to invest in other forms.
Gold vs USD
DepositsDeposits
Last Observation : June 2015Source: CBRT
19
Last Observation : June 2015Source: CBRT
Excludes accounts in participation banks

20. International gold reserves increased from 176 tonnes to
462 tonnes.
Source: CBRT Last Observation : May 2015
20
Source: CBRT. Last Observation : May 2015

21. Gold is a unique reserve asset which makes it a viable
choice for portfolio diversification
Current A year Ago % Change
Total 29,124 29,041 0.29
Euro Area 9,835 9,829 0.06
US 7,413 7,413 0.00
Germany 3,084 3,085 -0.02Germany 3,084 3,085 0.02
Italy 2,235 2,235 0.00
France 2,220 2,220 0.00
China 961 961 0 00China 961 961 0.00
Switzerland 948 948 0.00
Japan 697 697 0.00
N h l d 558 558 0 00Netherlands 558 558 0.00
India 508 508 0.00
Turkey 462 453 1.92
21
Source: Bloomberg Last Observation : May 2015