Turkey's top banking authority further lowers swap limit by 15 percent
Turkey's Banking Regulation and Supervision Agency (BDDK) ruled that Turkish banks are allowed to swap only 10 percent of their legal capital. In August 2018, The BDDK had already lowered the limit of swaps, futures, forwards and options with a foreign currency and a Turkish Lira leg to 25 percent of the banks’ legal capital.
Turkish banks can now swap only 10 percent of their legal capital, Turkey's Banking Regulation and Supervision Agency (BDDK) said on Feb. 8.
Following severe currency fluctuations, the BDDK had ruled in August 2018, that banks could perform swaps, futures, forwards and options with a foreign currency and a Turkish Lira leg with only 25 percent of their legal capital.
"It has been decided that the limit be applied at 10 percent [of banks' legal capital]," said the official BDDK statement.
The BDDK statement noted that the 10 percent ratio is to be re-calculated both on a stand-alone basis and consolidated everyday and that no new transactions will be allowed in the case of overdrafts.
A swap in finance is a contract between two parties to trade financial instruments for a period of time, in which at least one party usually offers foreign currencies.