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Turkey's central bank took fresh steps on Tuesday to boost lira deposits, raising the ratio of bonds that banks must hold for foreign exchange deposits and requiring those with less than 50% lira deposits to hold even more bonds from 2023.

The central bank raised the securities maintenance ratio required for foreign exchange (forex) deposits to 5% from 3% of deposits as of this month, and said further steps would be taken this year and next as part of its "liraization strategy".

In 2023, lenders with less than half of deposits in lira will need to hold an additional seven percentage points of bonds, marking the latest regulatory change meant to backstop an unorthodox policy of interest rate cuts amid soaring inflation.

Yields on the treasury's 10-year benchmark bond fell to 11.32% in response, from 13.12% on Monday. The lira was little changed at 18.5890 against the dollar.

"The 7 percentage points of additional bonds requirement is high, so it appears the central bank wants ... banks to have at least 50% and if possible 60% of deposits in lira next year," said a forex dealer at one bank.

Bankers told Reuters the new rules would require lenders to hold an additional 80-100 billion lira ($4.3-5.4 billion) of bonds.

The bankers, requesting anonymity, also said individuals' lira deposits were now 46% of total deposits, while commercial entities lira deposits were 47%.

Also from 2023, banks whose lira deposits are between 50-60% of the total must hold an additional two percentage points of bonds beyond the 5% set for this year, the central bank said.

Turks have snapped up dollars in recent years to hedge against one of the deepest currency depreciations in emerging markets, due largely to monetary policy easing and high inflation.

The lira shed 44% versus the dollar last year and has fallen another 29% this year. Inflation was 83% last month.

The central bank has urged forex conversions with a series of rules beginning in December 2021, when a historic currency crisis hit, after which lira deposits rose.

"The practice has strengthened banks' balance sheets and supported financial stability," the central bank said.

By the beginning of 2023 the level of securities banks must hold will be based on lira-deposit share targets.

Previously, the central bank required banks to hold an additional 7% of securities if they had a conversion rate from forex to lira of less than 5% of their deposits.

BDDK regulator data shows individuals' forex deposits amounted to 2.69 trillion lira ($144.74 billion) as of Oct. 7, while lira deposits totalled 2.02 billion lira.

In the same period, forex deposits of commercial entities were 1.61 trillion lira while lira deposits were 1.27 trillion lira.

The central bank is expected to cut its policy rate again this week, by 100 basis points to 11%, a Reuters poll shows, after President Tayyip Erdogan called for more easing each month and said rates should be single digits by year-end. (Reuters)

Russia said on Tuesday that four Ukrainian regions whose annexation it proclaimed last month are under the protection of its nuclear arsenal.

The statement from the Kremlin came at a moment of acute tension, with both NATO and Russia expected to hold military exercises shortly to test the readiness of their nuclear weapons forces.

Asked by reporters if the regions were under Moscow's nuclear umbrella, Kremlin spokesman Dmitry Peskov said: "All these territories are inalienable parts of the Russian Federation and they are all protected. Their security is provided for at the same level as [it is for] the rest of Russia's territory."

President Vladimir Putin said last month that Moscow was ready to use nuclear weapons if necessary to defend Russia's "territorial integrity". U.S. President Joe Biden said on Oct. 6 that his threat had brought the world closer to "Armageddon" than at any time since the 1962 Cuban Missile Crisis, when many feared a nuclear war might be imminent.

Nearly eight months into his invasion of Ukraine, some analysts believe the likelihood of Putin resorting to nuclear weapons has increased since his army suffered a series of major defeats. Putin's ally Alexander Lukashenko, the president of Belarus, warned the West last week against backing Russia into a corner.

Other analysts have argued the nuclear risk is overstated, suggesting it would be suicidal for Putin to embark on such an escalation.

NATO is conducting nuclear preparedness exercises this week and has said it expects Russia to hold its own nuclear drills imminently, but Peskov said he had no information on that.

"There is an established system of notifications to inform about the conduct of exercises, and this is carried out through the channels of the Ministry of Defence," he said.

Putin last month proclaimed that the territories Moscow was taking from Ukraine would be part of Russia "for ever". But Russia does not wholly control any of the four regions and has yet to define their borders.

The annexation was condemned as illegal by Ukraine, its Western allies and an overwhelming majority of countries in the United Nations General Assembly.

Russia has lost ground in the four regions even since it claimed control over them in a lavish Kremlin ceremony on Sept. 30. Peskov said work was still under way to integrate them into Russia's legal, economic and security systems. (Reuters)

Egypt has missed out on an additional $75 million in American military aid after a senior Democratic U.S. senator blocked the funding over concerns about Cairo's human rights record including holding political prisoners.

Senator Patrick Leahy, chairman of the Senate Appropriations Committee, rejected an assessment offered by the U.S. State Department to justify the aid, which was subject to conditions under a law passed by Congress last year. The committee has jurisdiction over spending legislation including U.S. financial assistance for Egypt.

"We should take this law very seriously, because the situation facing political prisoners in Egypt is deplorable," Leahy told Reuters in a statement.

"We can't give short shrift to the law because of other policy considerations. We all have a responsibility to uphold the law and to defend the due process rights of the accused, whether here or in Egypt," Leahy said.

The conditions set by Congress require Egypt to make "clear and consistent progress" in releasing political prisoners and providing detainees with due process of law.

The United States allocates around $1.3 billion in military aid to Egypt annually. Much of it has no conditions attached. But the State Department withheld $130 million of military aid to Egypt in September over broad rights concerns, but said it would allow another $75 million to be paid, citing progress by the Egyptian government on political detentions and due process, including the release of about 500 political detainees this year.

But Leahy objected. Talks between his office and the State Department failed to resolve the issue, and the $75 million in funding expired on Sept. 30.

The State Department did not immediately respond to a request for comment.

Leading human rights groups including Amnesty International and Human Rights Watch have accused Egyptian President Abdel Fattah Al-Sisi's government of widespread abuses such as torture and the detention of tens of thousands of political prisoners.

Sisi has denied that Egypt holds political prisoners. He also has said that stability and security are paramount for Egypt and that authorities are promoting rights by trying to provide basic needs such as jobs and housing.

Analysts have said Western powers are reluctant to take serious action against a strategic ally, in Egypt, that has served as a mediator in longstanding issues such as the Arab-Israeli conflict and also controls the Suez Canal, one of the world's most important shipping lanes.

U.S. officials have called the American relationship with Egypt complex. The most populous Arab country is a vital ally and Washington is still committed to support it for what U.S. officials call "legitimate defense needs." (Reuters)

European Union foreign ministers are expected to agree on a mission to train 15,000 Ukrainian troops from next month and an extra 500 million euros worth of funding for arms deliveries to Kyiv when they meet in Luxembourg on Monday.

The ministers are also likely to slap additional sanctions on Iran over Tehran's latest crackdown on protesters, and take a fresh look at the bloc's relations with China, paving the way for a potentially tougher stance on Beijing.

Two senior EU officials said the military training would start in mid-November and would take place on EU territory at one hub in Poland and another in Germany.

Several EU countries have already been instructing Ukrainian troops on how to use specific weapons and this will continue.

The European Union has supported Kyiv since the start of the war with financial and, in a first for the bloc, military aid.

The foreign ministers will agree to add a further 500 million euros ($486 million) to a fund that reimburses EU member states for arms delivered to Ukraine, bringing the total amount earmarked for arms for Kyiv to over 3 billion euros.

Unlike earlier tranches, the additional money will also cover costs for repair and maintenance of weapons already delivered to Ukraine.

SANCTIONS ON IRAN

The EU ministers are expected to impose travel bans and asset freezes on some 15 Iranians involved in the crackdown on demonstrators in Iran, who took to the streets after the death in police custody of 22-year-old Mahsa Amini.

EU foreign ministers will also discuss the transfer of Iranian drones to Russia, opening the way for potential further sanctions that could be agreed at a later date.

With regard to China, ministers will look into a "fine tuning" of the relations, officials said, noting that Beijing is a crucial trade partner for the EU and Europe depends on Chinese products and raw materials.

Diplomats say Brussels is concerned that Chinese President Xi Jinping is setting China on an increasingly authoritarian path, and uneasy about Xi's support of Russian President Vladimir Putin.

"The objective is not to change radically this (EU) policy but, obviously, things have happened and ministers will be talking about that," one EU official said, adding that there may be a need to change policy in the future.

He said the bloc's leaders would discuss China policy at a summit on Thursday and Friday, and the EU would also monitor closely the Communist Party Congress that opened on Sunday. (Reuters)