Turkish companies facing forex payments can open lira accounts protected against depreciation without converting foreign exchange.
An announcement in the country's Official Gazette said the accounts would have a minimum maturity of one month compared to a previous minimum of three months under the scheme.
According to the recent decision, companies with obligations related to import costs or repayments of foreign currency loans can now open foreign currency or Turkish lira deposit and participation accounts.
Additionally, resident legal entities with foreign currency liabilities who hold foreign currency deposit accounts in dollars, euros and sterling and foreign exchange-denominated participation fund accounts can now request to convert their balances into Turkish lira at the per-maturity rate. The Central Bank of the Republic of Türkiye (CBRT) will purchase the foreign currency at the same speed and transfer the Turkish lira to the relevant bank on behalf of the account holder.
The recent announcement outlines that the maturities of the Turkish lira deposit or participation accounts opened by banks for legal entities residing in Türkiye will be determined by the CBRT and will not be less than one month. In addition, resident legal entities with foreign currency liabilities can also open accounts for their Turkish lira deposit or participation fund balances at banks, based on the per-maturity rate, for at least one month, upon the account holder's request.
At the end of the term, the principal and interest will be paid to the Turkish lira deposit account holder, while the bank will pay the balance of the participation account. The central bank will transfer the amount calculated by deducting the interest or profit share from the amount calculated over the exchange rate difference to the relevant bank for payment to the deposit or participation account holder. These accounts may be renewed at maturity, and the CBRT will determine the scope, procedures, and principles for renewal.
Domestic resident legal entities who open a deposit or participation account will be required to commit not to purchase foreign currency during the account's maturity. If the commitment is fulfilled, the central bank will consider the loan usage requests of the domestic legal entities. However, if the promise is not fulfilled, it will be deemed unfulfilled, and the lender will not accept such requests for one year from the date of determination.
The announcement outlined that the interest rate applied to deposit accounts cannot be lower than the one-week repo rate determined by the CBRT. Meanwhile, the yield to the participation account should be lower than the cost incurred in the one-week resale promise and purchase transactions made by the CBRT within the scope of open market transactions with participation banks. Therefore, if there is a difference between the two rates, the participation bank should cover it by participation banking principles.
Furthermore, the decision states that the central bank can determine the maximum interest rate applicable to the bank's deposit account.
Ankara launched the scheme protecting lira deposits from depreciation in late 2021 to ease a currency crash in which Turks were flocking to dollars. As a result, the lira lost 44% versus the dollar that year and nearly 30% in 2022 but has stabilized this year.