Turkey’s BDDK banking watchdog on Monday imposed a settlement delay for FX purchases by individuals of more than $100,000, a move that could raise concerns about capital control in the country as it looks to protect the value of its local currency.
The settlement date for FX purchases by individuals of more than $100,000 – or equivalent in other currencies – will be the following day, the letter sent from the watchdog to banks showed.
Turkey’s lira has been battered since a crisis last year saw the currency lose nearly 30 percent of its value against the dollar. It has lost some 12 percent this year on concerns over ties with Washington and a re-run of Istanbul mayoral elections.
Authorities have recently taken unorthodox steps to protect the local currency, including state banks selling dollars to prop up the lira. Ankara also raised a tax on some foreign exchange sales to 0.1 percent from zero last week, in an effort to discourage Turks converting savings to foreign currencies.
The latest move, which will be effective on Tuesday, is aimed at “contributing to the stable operation of financial markets and the effective operation of the loan system and the prevention of potential speculative transactions”, the BDDK said in the letter.
It means that FX purchases of more than $100,000 by individuals will be transferred to their account the following day. Economists have been concerned about the central bank’s ability to protect the lira against another sharp decline, given that the bank’s forex reserves have decreased significantly in recent months.
Turks have flocked to foreign currencies in the months since last year’s crisis hit its peak in August, when the lira fell as much as 42 percent against the dollar.
Forex deposits and funds including precious metals of Turkish individuals rose steadily in the six months to April but have slightly declined since then.
“When we look at the impact, it doesn’t limit capital movements but limits the accessibility,” one senior banker said. “The real concern is what step will be taken next on this issue.”