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New restrictions on derivative transactions with foreign counterparties in response to Covid-19




Due to Covid-19 Outbreak, as a measure to protect the financial stability, Banking Regulation and Supervision Agency (“BRSA”) and Capital Markets Board (“CMB”) imposed certain restrictions on derivative transactions to be carried out with foreign counterparties.

With respect to the decision of Banking Regulation and Supervision Council on the date of 12 April 2020 numbered 8989, BRSA has published a press release. In the framework of this press release, the following decisions are taken.

  • The sum of all the swap, forward, option contracts between Turkish resident bank and foreign counterparties on the maturity of which Turkish Liras (“TRY”) will be purchased by the respective foreign counterparty in exchange of foreign currency, is limited with 1% of the respective bank’s latest announced equity ratio. With the new release dated 12 April 2020, the ratio has been reduced to 1%, which was previously announced as 10% in BRSA press release dated 9 February 2020.

  • The sum of all the swap, forward, option contracts between Turkish resident banks and foreign counterparties on the maturity of which foreign exchange will be purchased by the respective foreign counterparty in exchange of TRY, is limited with a ratio of the bank’s latest announced equity that is specified due to the maturity dates (value date) of these transactions. In this framework, the ratio will apply as follows: 1% for the ones whose maturity will end 7 days later; 2% for the ones whose maturity will end 30 days later and 10% for the ones whose maturity will end 1 year later. With the new release dated 12 April 2020, the ratio has been reduced to 1% while it has been applied as 10% for the derivative transactions whose maturity will end 7 days later.

  • Given that these derivative contracts are based on maturity, any change or extension of this maturity date requires prior written approval of BRSA.

  • In the press release dated 9 February 2020, BRSA exempted the swap, option and derivative contracts with respect to the purchase and sale of Turkish Lira on the maturity date, to be engaged between Turkish bank and its foreign consolidated partnership that is incorporated as a financial/credit institution from the limitation imposed with by BRSA and this exemption is kept as it is in the press release dated 12 April 2020.

  • In the press release dated 9 February 2020, BRSA applied different equity ratio due to the maturity date of the derivative contract on the maturity of which TRY will be purchased (ratio of 75% for the maturity dates 90-360 days; ratio of 50% for the maturity dates over 360 days), whereas, these ratio-maturity practice has been revoked with BRSA press release dated 12 April 2020.

CMB has published its press release with respect to this limitation on 13 April 2020 and on the same day, announced its decisions through CMB Bulletin No. 2020/24. In the framework of the press release and CMB Bulletin, the following decisions are taken.

  • The sum of all the swap, forward, option contracts between capital market institution in Turkey and foreign counterparties on the maturity of which TRY will be purchased by the respective foreign counterparty in exchange of foreign currency, is limited with 1% of the respective capital market institution’s latest announced equity ratio.

  • Given that these derivative contracts are based on maturity, any change or extension of this maturity date requires prior written approval of CMB.

  • The sum of all the swap, forward, option contracts between Turkish capital market institution and foreign counterparties on the maturity of which foreign exchange will be purchased by the respective foreign counterparty in exchange of Turkish Lira, is limited with the respective capital market institution’s latest announced equity ratios designated due to the value dates of these transactions. In this framework, the ratio will apply as follows: 1% for the ones whose maturity will end 7 days later; 2% for the ones whose maturity will end 30 days later and 10% for the ones whose maturity will end 1 year later.


For further information on this matter, please contact us via info@sadik-sadik.com.


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