The Kur Korumalı Mevduat (KKM, "FX-protected deposit") scheme was introduced in December 2021 as an emergency response to a lira crisis. The mechanism was unusual: Turkish residents could hold lira deposits with banks at TRY interest rates, but if the lira depreciated against the dollar by more than the deposit's interest rate over the term, the Turkish Treasury would compensate the depositor for the difference. The scheme effectively transferred currency-conversion risk from depositors to the public balance sheet. At its peak in 2022-2023, the KKM stock exceeded $100 billion in TRY-equivalent and represented a non-trivial fraction of total Turkish bank deposits.
By Q1 2026, the scheme has been substantially wound down. The remaining stock is a small fraction of the peak. The Treasury and CBRT have ceased aggressive issuance of new KKM accounts and have allowed maturing stock to roll into ordinary TRY or FX deposits at depositors' choice. The wind-down has been one of the more consequential policy normalisation steps under Governor Karahan's orthodox-policy framework, freeing the public balance sheet from the conversion risk and allowing CBRT reserve accumulation that had been functionally constrained while KKM was being actively expanded.
This piece walks through the scheme's origin, the wind-down trajectory, and what the post-KKM environment means for Turkish retail savings, lira trading, and the broader CBRT framework.
What KKM Actually Did
The mechanism is worth setting out precisely because the policy debate has often used loose language.
A KKM deposit was structured as a TRY-denominated time deposit at a bank. The deposit paid an interest rate set as a function of the CBRT policy rate (typically with a small premium). At maturity, the depositor was entitled to whichever was higher: the original deposit plus the TRY interest, or the original deposit converted to USD at the start-date FX rate, then converted back to TRY at the maturity-date FX rate.
The mechanism produced two scenarios.
If the lira held or appreciated against the dollar over the term: the depositor received the TRY interest, the same as on an ordinary TRY deposit.
If the lira depreciated against the dollar by more than the TRY interest: the depositor received the FX-equivalent payout. The shortfall between the TRY interest and the FX-equivalent value was paid by the Treasury — the bank received the Treasury subsidy and passed it to the depositor.
The Treasury thus assumed the FX risk. The cost to the public balance sheet, in years where the lira depreciated significantly, was substantial. The 2022-2023 fiscal cost of the KKM scheme has been estimated by various Turkish economic analyses at multiple percent of GDP.
Why the Scheme Existed
KKM was introduced during a December 2021 lira crisis when the depositor flight from TRY into FX (so-called "dollarisation") had reached levels that threatened banking sector liquidity and CBRT reserve adequacy. The scheme's logic was to give depositors a TRY-denominated product that was economically equivalent to FX deposits without the actual FX flow. If a meaningful share of the would-have-been-FX deposit base could be routed into KKM instead, banks would retain TRY funding and CBRT would not face the reserve drain that mass deposit conversion would otherwise produce.
The scheme worked in its emergency-response function. KKM stock rose rapidly through 2022, the rate of dollarisation slowed, and the immediate crisis was contained. The fiscal cost was the price of that containment.
The scheme was always understood as transitional. The orthodox framework that began in mid-2023 with rate normalisation was incompatible with continued KKM expansion — once TRY rates were sufficiently positive in real terms, ordinary TRY deposits would offer competitive returns and KKM would no longer be needed. The wind-down was the policy logic following from the rate normalisation.
The Wind-Down Trajectory
The wind-down has occurred in stages from mid-2023 through 2026.
Phase 1 (mid-2023 to end-2023): Reduced new issuance. The Treasury and CBRT signalled that KKM was a transitional scheme and reduced the active promotion of new accounts. Existing accounts continued to be honoured.
Phase 2 (2024): Active rollover discouragement. Maturing KKM accounts faced discouraging signals — interest premiums on KKM versus ordinary TRY were compressed, eligibility for new KKM was tightened, and CBRT communication explicitly framed KKM as approaching wind-down. KKM stock declined materially.
Phase 3 (2025): Continued run-off. The remaining KKM stock continued to mature. Some rollover continued under specific conditions, but the dominant flow was toward ordinary TRY or FX deposits at depositors' choice. By end-2025, the KKM stock had fallen to a small fraction of the peak.
Phase 4 (2026): Substantially wound down. Through Q1 2026, the residual KKM stock is small enough that it no longer represents a material constraint on CBRT framework operation. The Treasury's contingent FX liability has been correspondingly reduced.
The wind-down was not a sudden cessation but a deliberate run-off over roughly thirty months. The pace was calibrated to avoid disorderly depositor reaction — a mass exit from KKM into FX deposits would have replicated the 2021 dollarisation pressure that the scheme was originally designed to prevent.
What the Wind-Down Released
The completion of the wind-down has freed the framework in several ways.
Treasury fiscal capacity. The contingent FX liability that KKM represented is no longer actively expanding. Treasury budget planning is no longer dominated by the unpredictable cost of FX shortfall payments. Fiscal capacity is available for other purposes including the broader fiscal consolidation that the IMF and OECD frameworks have advised.
CBRT framework cleanliness. With KKM no longer constraining the framework, CBRT can operate the orthodox-policy mechanism without the cross-cutting effects of a parallel FX-protected deposit scheme. Rate decisions translate into deposit-rate decisions through ordinary mechanisms.
Banking sector composition. Bank deposit composition has normalised toward a balance of TRY and FX deposits at market-determined rates rather than a TRY-FX-protected hybrid. Bank balance sheets are simpler.
Reserve trajectory clarity. CBRT reserve accumulation — covered separately by this Desk — is not encumbered by the underlying KKM contingent obligation. The $78 billion net excluding-swaps figure in February 2026 is a more analytically clean measure than the equivalent at the height of KKM, when a meaningful share of CBRT FX was functionally hedging the contingent liability.
What the Post-KKM Environment Looks Like for Retail Savers
For Turkish retail savers in 2026, the choice between TRY and FX deposits operates without the KKM hedge that previously made TRY deposits asymmetrically attractive.
A retail saver allocating between TRY and FX deposits now faces a clearer trade-off:
TRY deposits at approximately 36-38 percent. Roughly matching headline inflation. Real return near zero. Vulnerable to depreciation in years when the lira moves more than expected.
USD deposits at approximately 4-5 percent (after Turkish bank rates on USD deposits). Lower nominal return but no TRY depreciation risk. Real return depends on USD-denominated inflation in the saver's spending profile.
EUR deposits at approximately 1-3 percent. Lower yield but exposure to EUR rather than USD if the saver's currency exposure is European.
Gold deposits at zero nominal yield plus gold price appreciation. Hedge for currency depreciation if gold rises. Vulnerable to gold price corrections.
The post-KKM environment requires retail savers to express their FX risk view explicitly through deposit allocation rather than implicitly through a Treasury-subsidised hybrid. The framework is more honest in showing the choice but less protective of TRY savers from concentrated FX risk.
What This Means for Lira Trading
The wind-down has implications for lira trading that go beyond the deposit base.
Reduced TRY support floor. During the active KKM period, the Treasury subsidy effectively created a floor under TRY positioning by making it economically attractive even during depreciation periods. With the subsidy gone, the TRY position is exposed to actual market dynamics. The lira's depreciation risk is more concentrated in the actual market response rather than partially absorbed by the Treasury balance sheet.
More transparent carry-trade economics. Foreign carry-trade positioning has historically had to factor the KKM dynamic into expectations — periods of high KKM expansion correlated with reduced TRY volatility but with increased Treasury credit risk. With KKM wound down, the carry-trade economics depend on the policy rate and the inflation trajectory rather than on a Treasury-subsidised hybrid.
Cleaner reserve framework. As covered above, the reserve framework operates with fewer contingent claims. The $78 billion net excluding-swaps figure in February 2026 represents a more directly deployable defence capacity than the same headline number would have during active KKM.
The Decision Reading
For Turkish retail savers thinking about lira allocation in 2026, the post-KKM environment is materially different from the 2022-2024 environment. The protection that KKM provided is gone. The choice is now explicit between TRY-denominated nominal returns at near-zero real yield and FX-denominated returns at lower nominal yields with FX exposure.
For traders positioning lira through 2026, the wind-down supports a cleaner reading of CBRT framework signals. Rate decisions translate more directly into FX market behaviour without the cross-cutting effects of a Treasury-subsidised deposit scheme. The framework is more responsive to underlying conditions and the trader can read CBRT signals more directly.
For the broader Turkish economy, the wind-down represents the completion of the emergency-response policy stack from the 2021 lira crisis. The framework has returned to a more orthodox configuration with CBRT operating monetary policy through standard channels and the Treasury operating fiscal policy without the contingent FX liability. This is policy normalisation in the technical sense, with the trade-offs that normalisation produces — reduced subsidy, cleaner signals, more concentrated exposure to underlying risk.
Honest Limits
The KKM stock figures and wind-down trajectory described above reflect publicly available CBRT and Treasury disclosures and broader Turkish financial market reporting through early 2026. Specific stock figures by week or month are subject to update as banks report individual portfolio movements. The fiscal cost estimates of the scheme are sensitive to estimation methodology and reasonable analyses produce a range of figures. The post-wind-down framework described above reflects the policy environment as in force in May 2026; reactivation of KKM-equivalent mechanisms during future stress events would change the analysis. None of this constitutes investment, financial, or tax advice for Turkish residents specifically.