Information Note on the Effect of Covid 19 on Banking Transactions
This information note is prepared to notify the amendments and additional restrictions of Banking Regulation and Supervision Agency (BDDK) made with respect to the previous decisions dated December 18, 2019 and February 9, 2020 regarding the already limited banks’ currency swaps, forwards, options and other similar derivative transactions with non-residents where banks receive and sale TL at the maturity date by way of adopting the decision dated April 12, 2020 in order to manage the risks arose out because of the global market’s non-equilibrium due to COVID-19 pandemic and to maintain the financial stability.
- BDDK decision dated February 9, 2020 and new amendments/restrictions adopted on April 12, 2020 (receive of TL at the maturity date)
With the BDDK decision dated February 9, 2020, the total notional amount of banks’ currency swaps, forwards, options and other similar derivative transactions with non-residents where banks receive TL at the maturity date, have been limited not to exceed 10% of the bank’s most recently calculated net assets. This restriction does not apply to the transactions with their non-resident financial subsidiaries and affiliates which are subject to consolidation.
Furthermore, under the BDDK decision dated February 9, 2020, it is stated that (i) for any transaction within the limitation with the maturity days between 90 – 360, 75 %; (ii) for any transaction within the limitation with the maturity mored than 360 days, 50% shall be applied as ratio for calculation. Moreover, it has been ordered to maintain the same ratio for the daily solo or consolidated calculation and not to make any transaction unless the current exceedings are rectified and not to renew the due transactions likewise.
This time, BDDK in order to manage the financial risks arose out due to COVID-19 pandemic and in order to maintain the financial sustainabilty, adopted following measures through the decision on April 12, 2020 for the aforementioned transactions of the banks with non-residents where banks receive TL at the maturity date:
- The total notional amount of banks’ currency swaps, forwards, options and other similar derivative transactions with non-residents where banks receive TL at the maturity date, have been limited not to exceed 1% of the bank’s most recently calculated net assets.
- The application of different ratio for the calculation of the transactions within the restriction depending on the maturity dates has been eliminated.
- In the event that the said transactions would like to be called before the maturity date or the maturity date would like to be be extended, BDDK’s written consent is required.
Apart from these additional measures, BDDK’s decision dated February 9, 2020 for the transactions where banks receive TL at the maturity date will be applied.
- BDDK decision dated December 18, 2020 and new amendments/restrictions adopted on April 12, 2020 (sale of TL at the maturity date)
With the BDDK decision dated December 18, 2020, the total notional amount of banks’ currency swaps, forwards, options and other similar derivative transactions with non-residents where banks sale TL becoming due within 7 days at most, have been limited not to exceed 10% of the bank’s most recently calculated net assets. This restriction does not apply to the transactions with their non-resident financial subsidiaries and affiliates which are subject to consolidation.
The aforementioned ratio (i) will be daily calculated on solo or consolidated basis, (ii) delta parameter should be taken into account for the calculation of option transactions, (iii) for the transactions effective date of which are later than the transaction date, the calculation should be made taking into account the transaction date and (iv) untilthe current exceedings are rectified, no transaction shall be made within the maturity period in which there is excess.
Likewise, BDDK, in order to manage the financial and other risks arised out due to COVID-19 pandemic and in order to support the already adopted measures, have adopted the following measures through its decision on April 12, 2020 for banks making the aforementioned transactions with non-residents where banks sale TL at the maturity date:
- On no calendar day, the total notional amount of banks’ currency swaps, forwards, options and other similar derivative transactions with non-residents where banks sale TL becoming due within;
- 7 days, have been limited not to exceed 1% of the bank’s most recently calculated net assets.
- 30 days have been limited not to exceed 2% of the bank’s most recently calculated net assets.
- 1 year, have been limited not to exceed 10% of the bank’s most recently calculated net assets.
- In the event that the said transactions would like to be called before the maturity date or the maturity date would like to be be extended, BDDK’s written consent is required.
Apart from these additional measures, BDDK’s decision dated December 18, 2020 for the transactions where banks sale TL at the maturity date will be applied