As a continuation of the recent normalization steps taken, the BRSA stretched the limits previously imposed on the total amount of foreign currency swap, forward, option and other similar derivative transactions of banks with non-residents. The banks' limit to sell TRY (as a ratio to equity) increased;
· From 2% to 5% for transactions that are due within 7 days,
· From 5% to 10 for transactions that are due within 30 days,
· From 20% to 30% for transactions due within 1 year.
Thus, another normalization was achieved in the limitation of equity in TRY-legged transactions applied to non-residents. This normalization step, which relieves banks in terms of derivative transactions with foreigners, will also be beneficial in terms of easing the squeezed liquidity in the market. It is important that economic decision makers take steps in line with the “market-friendly messages” following the economic administration and CBRT changes that have taken place since the weekend. This will also increase investor confidence before the November 19 MPC in which transition to orthodox monetary policy and interest rate hike is expected.
Previously, swap limits with foreigners were lowered to levels of 1%, 2% and 10% for weekly, monthly and annual terms, respectively, to prevent currency attacks. BRSA updated these limits as 2%, 5% and 20% on September 25 within the scope of complementary normalization steps. It can be expected that such additional complementary policy steps will continue to be taken. At this stage, we expect the asset ratio rule for banks to be further eased or to be completely removed.
