The Turkish Lira has suffered a battering in the world currency markets over the last few weeks and the recent increase in interest rates to 12 percent has done little to reverse the decline. So how protected are your Turkish savings should the worst happen and your bank fails because of the impact of the currency crisis?

Many expats have deposited large sums of cash in the Turkish banking system to see them through their retirement. They may have done this to take advantage of the historical higher interest rates or just because it’s cheaper and more convenient to keep your cash close at hand.

But the recent run on the Turkish Lira, that has brought new historic low values to the currency, means its has lost its once strong status and the Lira in your bank is now worth much less than it did against the US Dollar, British Pound and Euro.

In fact, if you had 100,000 TL this time last year it would have been worth around £34,000 now it’s worth just £27,000.

That knock on effect could harm the very Turkish bank you save your money with if they have not diversified their borrowing.

How safe are your deposits with Turkish banks?

We hope to answer that question in our Q&A below.

Does Turkey have a deposit protection scheme like the UK?

Yes it does. It’s called the Savings Deposit Insurance Fund of Turkey (SDIF) or in Turkish TASARRUF MEVDUATI SİGORTA FONU (TMSF).

The fund was first established back in the 1930’s but the legislation and funding of the scheme has been revised regularly since.

The scheme protects certain deposits and investments that are held in registered domestic banks in Turkey and are operated by private individuals. However, unlike the UK, the Turkish scheme is actually a cash fund and not just underwritten by the banks.

What funds are covered?

Deposits covered by the scheme include Turkish Lira, foreign exchange currency or accounts linked to precious metals such as gold and silver. The scheme also covers what are called ‘participation funds’ such as equity funds.

What funds are NOT covered?

Business accounts and offshore accounts are not covered under this scheme. The exclusion also includes those bank accounts that offer ‘excessive’ interest rates.

What is the maximum payout under the scheme?

The maximum pay out from the scheme is 100,000 YTL per person per deposit bank – around 32,000 GBP at today’s exchange rate.

However, if the TMSF is called into administer a bank before it collapses then all deposits held by private individuals are covered and not just up to the 100,000 YTL limit.

Does banking with HSBC, ING or Fortis or another international bank located in Turkey offer better protection?

A global name doesn’t offer additional protection. These are banks are classified and registered as foreign commercial banks established in Turkey. Although these are part of well known global brands they are stand alone banks in Turkey and you would have to claim from the SDIF.

If the money is held offshore you’ll need to claim from the fund of where the money is held as the SDIF scheme does not cover offshore deposits.

Does banking with one of the government controlled banks offer greater protection?

Many Turks, mindful of the 2001 banking crisis in Turkey, will advise you to bank with one of the nationalised banks such as Vakif, Ziraat Bank or Halk Bank. They believe you are offered greater protection because these banks are unlikely to collapse. Whilst this ‘may’ be the case you can achieve the same effect by spreading your money around different banks and managing risk and return.

Don’t forget the scheme only covers 100,000 YTL per person per bank.

What Currency would Deposits be Repaid In?

All refunds would be in Turkish Lira.

Am I Covered if the Turkish Lira Devalues

No. That is the risk you take holding money in another currency.

So what should I do now?

The secret of all investing can be summed up by the old adage ‘never have all your eggs in one basket’.

This means, unless the Turkish Government changes the limits, try to ensure that you don’t have any more than 100,000 YTL in any one bank per account holder and try to hold your money in various currencies.