Measures Taken by The Central Bank of Turkey In Light of COVID-19

A number of notable measures have been taken by the Central Bank of Turkey in order to contain the adverse effects of the global uncertainty led by the coronavirus (COVID-19) pandemic on the Turkish economy. These measures were announced on 17^th March 2020 followed by the announcement of additional measures on 31^st March 2020. Below you may find the highlights of the announcements.

• The maximum interest rate credit card lenders could charge each month has been revised to 25% for Turkish lira and 1% for foreign exchange transactions. (implementation date: 01/04/2020)
• The interest rate where payments are overdue will be a maximum55% for Turkish Lira charges and 1.30% for transactions in foreign currencies. (implementation date: 01/04/2020)
• The CBRT will provide banks with as much liquidity as they need through intraday and overnight standing facilities.
• The CBRTs’ benchmark one-week repo rate has been cut to 9.75% from 10.75%.
• Interest rates 150 basis points lower than the benchmark one-week repo rate through repo auctions with maturities up to 91 days has been introduced.
• Forex reserve requirement ratios will be broadly cut by 500 basis points for lenders that meet real credit growth conditions. These lenders will be provided with some $5.1 billion of forex and gold liquidity.
• Conventional swap auctions with maturities of six months, which are currently available for U.S. dollars, may also be held against Euro and gold at an interest rate 125 basis points lower than the one-week repo rate.
• The limits regarding the liquidity opportunity granted to “market maker banks” within the framework of Open Market Operations has been
• Under the Turkish lira and foreign exchange operations conducted at the CBRT, asset-backed securities and mortgage-backed securities have been included in the collateral pool.
• Maturities for repayments of rediscount credits, which shall be due from 18 March 2020 to 30 June 2020, can be extended by up to 90 days. Accordingly, firms can apply to intermediary banks and exchange their current bills for a bill with an up-to- 90-day-longer maturity, without any repayment. This can postpone the repayment of rediscount credits corresponding up to USD 7.6 billion.
• Turkish lira-denominated rediscount credits shall be extended based on the following principles:

1. 1. A total limit of TRY 60 billion has been defined for the credits.
   2. Of this limit, TRY 20 billion has been allocated for credit utilization via Türk Eximbank, TRY 30 billion for credit utilization via public banks, and TRY 10 billion for credit utilization via other banks.
   3. Minimum 70% of the credits to be extended via banks other than Eximbank will be allocated to SMEs.
   4. On a firm basis, the maximum amounts of credits have been set at TRY 25 million for SMEs and TRY 50 million for other firms.
   5. Firms that can obtain FX rediscount credits, overseas contracting companies, and firms participating in international fairs will be able to benefit from this credit facility.
   6. The interest rate for these credits will be 150 basis points lower than the one-week repo rate, i.e. the CBRT’s policy rate.
   7. The maximum commission rate of intermediary banks will be 150 basis points.
   8. The credits will have a maximum maturity of 360 days, and will be extended on condition that the export or foreign exchange earning services commitment as well as the employment level as of 1 March 2020 are maintained throughout the credit period.

If you would like to know more on the measures taken by The Central Bank of Turkey or require legal assistance, please get in touch with BerkerBerker Law Office via info@berkerberker.com or any other contact information listed at our website.