CBRT Publishes Communiqué on Foreign Exchange and TL Deposit Support
The Central Bank of the Republic of Turkey’s Communique regarding “Support for Foreign Exchange or Turkish Lira Deposits and Participation Accounts of Legal Entities with Foreign Exchange Liabilities” was published in the Official Gazette dated 30.03.2023, numbered 32148.
With this Communique, the conditions for providing support to legal entities located in Turkey with foreign exchange liabilities, related to the repayment of import debts or foreign exchange loans, have been outlined.
Accordingly, the support will be provided under the following conditions:
- Conversion of foreign exchange deposit accounts and participation funds into time deposit Turkish lira accounts or participation accounts,
- Turkish lira deposit or participation accounts can be used for this purpose.
These deposits, which will be created for at least one month, will be supported by the Central Bank, provided that a commitment is obtained from the depositor not to purchase foreign exchange during the term of the deposit.
1) Conversion of Foreign Exchange Deposit Accounts and Participation Funds into Time Deposit Turkish Lira Accounts or Participation Accounts
Legal entities with foreign exchange liabilities in Turkey, who have USD, Euro, or British Pound foreign exchange deposit accounts or foreign exchange participation fund accounts in banks, may convert their balances into Turkish lira upon their request. The conversion will be at the exchange rate of the beginning of the term.
A time deposit or participation account will be opened for at least one month, based on the terms determined by the Central Bank, using the converted Turkish lira.
The foreign exchange obtained from the bank in this process will be purchased by the Central Bank at the beginning of the term exchange rate, and the equivalent Turkish lira will be transferred to the relevant bank.
2) Existing Turkish Lira Deposit or Participation Accounts
For legal entities with foreign exchange liabilities, the bank will open time deposit or participation accounts in Turkish lira based on the current balance in Turkish lira deposit or participation fund accounts. This will be at the beginning of the term exchange rate, and the terms will be determined by the Central Bank, for at least one month.
3) End of Term Operations and Calculation of the Support to Be Provided
At the end of the term, the holder of the Turkish lira deposit account will be paid the principal and interest, and the holder of the participation account will receive the balance of the participation account at the end of the term.
If the exchange rate at the end of the term is higher than the exchange rate at the beginning of the term, and the amount calculated from the exchange rate difference is higher than the interest or profit share to be paid by the bank, the amount calculated from the exchange rate difference, after deducting the interest or profit share, will be transferred to the relevant bank by the Central Bank for payment to the deposit or participation account holder.
If an early withdrawal is made from the Turkish lira deposit or participation account before the term ends, no payment will be made by the Central Bank for the exchange rate difference.
The Central Bank may allow for the renewal of Turkish lira deposit or participation accounts opened under this scheme at the end of the term. The scope, procedures, and principles for renewal will be determined by the Central Bank.
4) Applicable Interest Rate
The interest rate applied by the bank on the deposit account cannot be lower than the one-week repo auction rate determined by the Central Bank. If the return on the participation account is lower than the cost derived from the Central Bank’s one-week reverse repo transactions with participation banks, the difference may be covered by the participation bank within the framework of participation banking principles. The portion not covered will not be paid by the Central Bank.
5) Important Notes
- If an early withdrawal is made from the Turkish lira deposit or participation account, no payment will be made by the Central Bank for the exchange rate difference.
- During the term of the deposit, the legal entities that open Turkish lira deposit or participation accounts under this Communique must commit not to purchase foreign exchange.
- If the commitment not to purchase foreign exchange is not fulfilled, the foreign exchange loan applications of the legal entities will not be accepted for one year from the date it is determined that the commitment has not been met.
- Banks and other financial institutions designated by the Central Bank are not covered by this support scheme.
You can access the relevant Communique here.
Sincerely,
BİLGENER
