Turkey’s banking watchdog, the Banking Regulation and Supervision Agency (BDDK), today imposed a settlement delay of one day for F/X purchases by individuals of USD 100,000 and above, or equivalent in other currencies. BDDK’s decision will be effective as from May 21st. This means that FX purchases of USD 100,000 or more by individuals will be transferred to their account the following day.
There are concerns that this move, which is aimed at protecting the value of the Turkish lira, is the start of the introduction of wider capital controls in Turkey. Turkey’s lira collapsed 40% in 2018 against the US dollar as a result of an overheated economy, presidential and parliamentary elections, and a row with the USA. It has lost a further 15% this year on concerns over a further rift with the USA and a re-run of Istanbul’s mayoral election.
The Turkish Treasury and Central bank have recently taken unorthodox steps to protect the Turkish lira, including persuading state banks to sell FX and not to provide foreign exchange markets with TL following postponement of repo bid invitations. The Turkish government also introduced a 0.1% tax on certain F/X sales on May 15th.
In its statement, BDDK said that the new measure was aimed at “contributing to the stable operation of financial markets and the effective operation of the loan system and the prevention of potential speculative transactions”. However, financial analysts believe that Turkey is trying to resolve its economic problems through short-term measures rather steps to restore confidence. They see this new and similar measures as worsening the perception of risk by increasing concerns that capital movements will be limited further. They are also aware that the Central Bank’s forex reserves have decreased significantly in recent months.