Turkish lira/Bloomberg
Turkey is limiting the amount of hard currency local banks can exchange for lira with foreign investors, a move that could benefit the central bank by pushing dollar liquidity into its official reserves, reported Bloomberg.
By restricting the amount of dollars that banks can park with offshore funds, regulators may prompt Turkish banks in need of lira liquidity to tap the monetary authority’s own swap facility instead.
As of October 2019, the outstanding amount of short-term swaps with the central bank stood at $13.8 billion dollars, which the monetary authority reports as part of its foreign-currency holdings.
This latest attempt to wean local lenders away from the so-called offshore swap market may also help deter short-term speculative positioning in the lira. Traditionally, the swap market has been one of the biggest sources of funding for banks in Turkey and a key pool of lira liquidity for foreign investors trading local assets.
Volumes in the offshore market have collapsed since authorities began limiting the lira leg of offshore swap transactions last summer, in a bid to stand in the way of short-sellers after last year’s currency crisis.
In September 2018, the banking regulator capped the amount of liras banks can lend offshore to 25 per cent of the equity.
The Turkish central bank offered lenders a $1 billion three-month swap auction. Short-term swap rates offshore plummeted after the announcement, with the overnight rate falling below four per cent, some 800 basis points below the central bank’s own cost of funding.
MOST READ
BUSINESS
COVID-19 poses downside risks to Egyptian banksBUSINESS
UAE firms launch Covid-19 economic aid packagesBUSINESS
Saudi Arabia plans to boost oil export to 10...BUSINESS
Aldar to invest AED 2 million in Abu Dhabi...BUSINESS
Saudi Aramco posts a 21 per cent decrease in...BUSINESS
Oil drops 31 per cent as price war erupts...BUSINESS
ING Groep plans to sell its Turkish unitBUSINESS
Bahrain considers stake sell in oil assetsBUSINESS
NMC Health hires Moelis for debt restructuringBUSINESS
Saudi Aramco prepares for international listingBUSINESS
SABB seeks to boost corporate lendingBUSINESS
Egypt plans to resume IPOs of parastatalsBUSINESS
SHUAA Capital reports a net profit of AED 45...BUSINESS
HSBC considering exiting from Turkey
CPI Financial was established in Dubai in 1999 to meet the needs of an ever-expanding financial community, offering a comprehensive portfolio of market-leading products and services tailor-made for the banking and financial services sectors.
Loading More post
