TERM STRUCTURE OF DEPOSITS IN TURKISH BANKING SYSTEM

Abstract

This paper studies the term structure of deposits in Turkish banking system. It discusses the concepts of nominal maturity and effective maturity of deposits. It assumes that the main factors shaping the effective maturity of deposits are the dollarisation of deposits, the net interest return of domestic currency deposits, the volatility of foreign exchange currencies against domestic currency and the reserve requirement mechanism. This study recommends that extending the effective maturity of deposits rather than the nominal maturity of deposits is more likely the best strategy for Turkish banks. Every deposit has an embedded option to extend up to the effective maturity.

Keywords

• Deposits
• Nominal Maturity
• Effective Maturity.

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