Turkish banking watchdog on Wednesday relaxed bank limits on swaps and other transactions, a step that could make Turkish assets more attractive to foreign investors.
In the latest normalization step, the Banking Regulation and Supervision Agency (BDDK) raised the limits for swap, forward, option and other derivative transactions that Turkish lenders execute with nonresidents.
The Banking Regulation and Supervision Agency said derivative transactions where banks pay Turkish liras and receive short-term foreign exchange (FX) at the maturity date have been limited not to exceed 30% of the bank’s most recently calculated regulatory capital.
Limits were raised to 5% of bank equity, from 2%, for trades with seven days to maturity; to 10% from 5% for those with 30 days to maturity; and to 30% from 20% for one-year to maturity transactions.
In response, the Turkish lira jumped 1% and strengthened to 8.074 against the dollar before settling at 8.1136 at 11:30 a.m. local time. The lira has gained about 5% so far this week.
Commenting on the move, Enver Erkan, an economist at Tera Yatırım, said another normalization was achieved in the limitation of equity in lira-legged transactions applied to nonresidents.
