The Banking Regulation and Supervision Agency (BRSA) states in its decision numbered 10250 dated 24 June 2022 that “although some companies do not have foreign currency debt or foreign currency liabilities, and even have an excess foreign currency position, they purchase foreign currency using Turkish Lira (TRY) loans and hold foreign currency positions … TRY commercial loans with favorable conditions that are destined to go to production, employment and investment are continued to be used by some companies for foreign exchange purchases even though there is no real need”, and has put into force certain foreign currency asset limitations concerning TRY denominated cash loans by companies that are subject to independent auditing.

According to the said decision, as of 24 June 2022 and until a contrary decision is taken by the relevant authorities, “… Pursuant to the Statutory Decree No. 660 and related regulations, if the Turkish lira equivalent of the foreign currency cash assets (including gold, effective foreign currency and foreign currency deposits in banks) is over TRY 15 million; and the foreign currency cash assets of these companies exceed 10 percent of their total assets or net sales revenue of the last 1 year according to the most recent financial statements (whichever is higher), a new cash commercial loan in TRY shall not be granted to the said companies.’’

Accordingly, if a company (i) is subject to independent audit, (ii) has the TRY equivalent of foreign currency cash assets over TRY 15 million according to the financial statements submitted to the tax office, and (iii) if the said TRY equivalent of foreign currency cash assets exceeds 10 percent of its total assets or net sales revenue of the last 1 year (whichever is higher); then the company shall not be able to access to a new cash commercial loan in TRY.

With the BRSA’s decision dated 7 July 2022 and numbered 10265, the scope of foreign currency cash assets has been clarified. Accordingly, effective foreign currency including gold, foreign currency deposits, securities issued in foreign currency, participation shares of ETFs (Exchange-traded funds) indexed to gold or foreign exchanges or indices which follow these, reverse repo transactions with non-residents in foreign currency, foreign currency assets given to banks (including gold) in order to obtain TRY on spot within the scope of swap transactions are defined under this scope. Among the securities issued in foreign currency, Eurobonds issued by the Republic of Turkey are excluded from the scope.

With the decision numbered 10265, as of August 1, 2022, commercial cash loans in TRY to be made available by financial leasing, factoring, and financing institutions, have also been included in the scope, and the obligations imposed on banks became applicable to these companies as well.

As an exception, if companies, which are subject to the limitation of using cash loans in TRY due to the scope of these decisions, are also unable to use foreign currency loans in accordance with the relevant legislation; they shall be able to use cash commercial loans in TRY limited to their short position, in case they have a short position in foreign currency within a 3-month period starting from the application date.

The BRSA has also indicated the types of cash loans in TRY that shall be exempted from the implementation of the decisions. Accordingly, loans granted through corporate credit cards excluding cash withdrawals, loans converted into cash through the Direct Debit System (DDS), other loans that are irrevocable limit commitments and offer payment guarantees to third parties other than the company that are loan customers and the supplier financing loans provided to suppliers by crediting the company which is in the status of buyer, indemnified non-cash loan converted into cash loan in TRY, and loans restructured or extended within the scope of this restructuring under framework agreements except for loans that are not within the scope of restructuring and renewed by amending the terms of the contract or that are granted in order to partially or completely refinance existing loans are exempted from the implementation of the decisions.

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