Central Bank governor says Türkiye's fund market sound despite liquidations

Central Bank Governor Fatih Karahan on Tuesday reassured lawmakers that Türkiye's investment fund market continues to function soundly despite ongoing investigations and the liquidation of some funds, stressing that no systemic risks threaten the broader financial architecture. Speaking to parliament's Planning and Budget Committee, Karahan said volatility had been concentrated in individual funds within a limited segment of financial markets.

"We assess that the fund market overall continues to function soundly and that there is no problem affecting the financial system as a whole," he said. The Central Bank has moved to contain potential spillovers by increasing repo auction amounts, raising banks' borrowing limits tenfold, easing collateral requirements, and accelerating bond purchases. "We will continue to take the necessary steps depending on market conditions," Karahan added.

Fund flows and deposit shifts

Karahan noted that substantial fund withdrawals since Aug. 28 had partly shifted into bank deposits, with commercial and savings deposits rising by more than 800 billion Turkish liras ($16.3 billion). Including investment funds, the Turkish lira's share remained stable at around 61%-61.4%, while the pace of fund withdrawals has recently slowed, he stated. Three investment banks whose shareholder rights were transferred to the Savings Deposit Insurance Fund represented just 0.2% of the banking sector, Karahan said, adding that no systemic risk is currently expected from these institutions.

Inflation outlook and policy stance

Karahan told committee members that inflation's decline from 75% to the 30% range shows progress, although the targeted level has yet to be reached. Persistent rent and education inflation, slower monetary policy transmission, and food and energy supply shocks required interest rates to remain high for longer, he noted. Acknowledging costs for workers, businesses, and public finances, Karahan stated that low and predictable inflation is essential for sustainable growth. "Disinflation is being pursued not to impose costs on Türkiye, but because it is the only lasting solution to the problems being experienced today," he said.