Turkey Central Bank Warns Lenders Against Sending Dollars Abroad

Turkey’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, Bloomberg News reported. 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 Turkey, 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. Read more.