- Banks wired net $2.3 billion in first six weeks of 2023
- Scrutiny of FX transactions intensifies in run-up to elections
According to Bloomberg article published on February 24, 2023, Türkiye’s central bank has warned lenders in the country against sending dollars to their correspondent counterparts abroad, according to people familiar with the matter, its latest move to try to protect the lira.
The request comes after commercial banks wired a net $2.3 billion to deposit accounts abroad in the first six weeks of the year, one of the people said, asking not to be named because the information is confidential. Hard-currency outflows are hampering efforts to keep the lira stable and inflation in check in the run-up to elections slated for May.
While there are no regulations preventing banks from wiring capital to their correspondent banks abroad, Turkish officials have said that they want free cash kept in the monetary authority’s coffers. Lenders’ foreign-currency transactions have come under increased scrutiny in recent months, with the central bank asking them not to carry out significant transactions with foreign banks after market hours.
The latest warning applies to all commercial lenders operating in Türkiye, including units of foreign banks. The central bank declined to comment.
The commercial banks’ debt repayments are also causing FX outflows and pressuring the lira. Banks have cut their total foreign debt by almost half to $50 billion since the end of 2017, as the cost of foreign borrowing jumped and local demand for loans in hard currencies fell.
The rollover ratio for banks’ foreign borrowing fell to 92% in second half of last year, from over 100% in mid-2021, turning them into net payers of foreign debt.
Bloomberg Economics estimates the central bank spent as much as $108 billion to keep the lira relatively stable last year. It was still the second-worst performer among emerging-market currencies.
