Turkey: Banking Regulatory And Supervisory Authority Announced Details On The Decision Regarding Derivative Transactions Carried Out With Non-Residents

The transactions and persons that are within or outside the scope of the Decision are regulated under the Letter as follows:

• Currency swaps with one limb in Turkish Lira and the other in foreign currency, including gold, or forward, option and similar derivative transactions are within the scope of the Decision.
• Companies located in free trade zones are within the scope of the Decision.
• The derivative transactions where only interest payments are made and no principal exchange is performed, and transactions with T+1 and T+2 value dates where only spot trading is realized on the value date and transactions for which there is no settlement obligation as of any maturity date are not within the scope of the Decision.
• The following transactions are, without any exceptions, derivative transactions within the scope of the Decision:
  1. Derivative transactions carried out by the non-resident group treasury of a multinational company on behalf of the Turkish resident subsidiary.
  2. Derivative transactions for the repayment of principal instalments under investment loans,
  3. Derivative transactions carried out with foreign banks in respect of Turkish Treasury-guaranteed loans and project finance transactions.
  4. Derivative transactions within the scope of Eurobond issuances and
  5. Derivative transactions carried out by borrowers with non-residents in line with the terms and conditions of the ISDA (International Swaps and Derivatives Association) for hedging the risks arising from long-term foreign currency-denominated loans obtained from abroad.

The principles for the implementation of the Decision are regulated under the Letter as follows:

• The risk weighting of 500% under the Decision will be applied to commercial cash loans in Turkish Lira and foreign currency made available after June 23, 2022 to Turkish residents other than banks and financial institutions that enter into derivative transactions with non-residents in the event that these derivative transactions were carried out after June 23, 2022. Whether the borrowers have utilized the loan before or after the date of the derivatives transaction will be irrespective for the implementation of the risk weight.
• The implementation of %500 risk weight to the related loans will not change even if the derivative transaction is terminated.
• Conversion of non-cash loan into cash after June 23, 2022 will not be considered as a new loan within the scope of the Decision.
• A derivative transaction made before June 23, 2022 will be considered as a new derivative transaction within the scope of the Decision if amended after June 23, 2022.