30.03.2023/46
Central Bank of Turkey Regulation on Support for Foreign Currency or Turkish Lira Deposit and Participation Accounts of Legal Entities with Foreign Currency Liabilities Published
The regulation on support for legal entities with foreign currency liabilities and their foreign currency or Turkish lira deposit and participation accounts was published in the Official Gazette No. 32148 on 30.03.2023.
With this regulation, the conditions for providing support to legal entities residing in Turkey with foreign currency liabilities, which are documented, related to the payment of import costs or foreign currency loan repayments have been determined.
Accordingly;
- Conversion of foreign currency deposit accounts and participation funds into Turkish lira time deposit or participation accounts,
- Turkish lira deposit or participation accounts
will be supported by the Central Bank for periods to be determined by the Central Bank, with a commitment not to buy foreign currency during the term, for a period of at least one month.
1) Conversion of Foreign Currency Deposit Accounts and Participation Funds into Turkish Lira Time Deposit or Participation Accounts
Foreign currency deposit accounts in USD, Euro, and British Sterling, as well as foreign currency participation fund accounts held by legal entities residing in Turkey, will be converted into Turkish lira at the exchange rate at the beginning of the term upon the request of the account holder.
For legal entities residing in Turkey, a Turkish lira deposit or participation account will be opened for a period of at least one month, as determined by the Central Bank, and the conversion will be made accordingly.
The foreign currency obtained by the bank as a result of this transaction will be purchased by the Central Bank at the exchange rate at the beginning of the term, and the corresponding Turkish lira will be transferred to the relevant bank.
2) Opening Accounts with Existing Turkish Lira Deposit or Participation Account Balances
Legal entities residing in Turkey with foreign currency liabilities, for their existing Turkish lira deposit or participation fund account balances at the bank, will open accounts for a period of at least one month, as determined by the Central Bank, based on the exchange rate at the beginning of the term upon the request of the account holder.
3) End of Term Transactions and Calculation of Support to be Applied
At the end of the term, the principal and interest will be paid to the Turkish lira deposit account holder, and the balance of the participation account at the end of the term will be paid to the participation account holder by the bank.
If the end-of-term exchange rate is higher than the exchange rate at the beginning of the term and the amount calculated based on the exchange rate difference is higher than the interest or profit share to be paid by the bank, the amount calculated based on the exchange rate difference will be reduced by the interest or profit share and transferred to the relevant bank for payment to the account holder by the Central Bank.
If an early withdrawal is made from the Turkish lira deposit or participation account, no payment related to exchange rate differences will be made by the Central Bank.
At the end of the term, the Central Bank may allow the renewal of Turkish lira deposit or participation accounts opened under this practice. The scope, procedures, and principles for the renewal of the account will be determined by the Central Bank.
4) Interest Rate to be Applied
The interest rate to be applied by the bank to the deposit account cannot be lower than the one-week repo auction rate set by the Central Bank. If the return provided for the participation account is lower than the cost arising from one-week repo transactions conducted by the Central Bank with participation banks, the difference may be covered by the participation bank under the principles of participation banking. For the uncovered part, no payment will be made by the Central Bank.
5) Important Considerations
- If an early withdrawal is made from the Turkish lira deposit or participation account, no payment will be made by the Central Bank for exchange rate differences.
- For legal entities residing in Turkey who open a deposit or participation account under this regulation, a commitment not to buy foreign currency during the term of the account will be obtained.
- If the commitment not to buy foreign currency is not fulfilled, legal entities that fail to fulfill their commitment will not have their credit usage requests accepted from the Central Bank for one year from the date it is determined that the commitment was not fulfilled.
- Banks and other financial institutions determined by the Central Bank are outside the scope of this support program.
You can access the relevant regulation here.
Sincerely,
BİLGENER
