Turkish banking watchdog extends the scope of the exemptions from TRY access restrictions

The Banking Regulation and Supervision Agency (BRSA) extended the scope of the exemptions from certain TRY access restrictions, with an announcement made on 6 August 2020.

Previously, with its 12 April and 5 May decisions, the BRSA had restricted foreign banks’ access to Turkish Lira in order to alleviate the financial conditions arising from the Covid-19 pandemic. Pursuant to the restriction, the total TRY placement, TRY reserve, TRY repo, and TRY credit transactions to be made with foreign financial institutions were limited to 0.5% of their equity capital. On 28 July 2020, the BRSA exempted International Development Banks from these restrictions.

According to the latest decision on 6 August 2020, the BRSA exempts foreign banks from this restriction as well. Foreign banks will be able to conduct financial transactions defined with this decision by opening a Turkish Lira bank account in a domestic bank and providing a written declaration and commitment to the related bank that they will use TRY liquidity obtained from domestic market only to buy TRY securities and to deposit excess TRY liquidity to domestic banks. Foreign banks must submit their request of exemption to the BRSA together with their bank account details.

Upon receipt of BRSA’s approval, foreign banks will be exempted from the restrictions for the following financial transactions:

• Currency Swaps where the foreign bank buys TRY and sells FX in the beginning, while sells TRY and buys FX at forward,
• Currency Swaps with BIST FX Swap Market where the foreign bank buys TRY and sells FX in the beginning, while sells TRY and buys FX at forward,
• Repo and Reverse Repo transactions with BIST Repo Market,
• TRY deposits at domestic banks

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