Turkey Allows Banks to Lend More Dollars to Central Bank

(Bloomberg) -- Turkey raised the amount of dollars commercial banks can lend to the central bank through currency swap deals, a step intended to boost the nation’s foreign reserves, according to a copy of a directive seen by Bloomberg.

The regulation covers bank foreign-exchange lending to the monetary authority via short-term swaps, which were capped at 20% of their total FX market transaction limits, according to the central bank directive on Tuesday.

The changes will allow commercial lenders to park more of their foreign holdings at the regulator while borrowing liras in return, boosting Turkey’s official reserves.

In the first half of 2019 the central bank boosted the amount of dollars it borrowed though commercial lenders, masking a sudden drawn down in reserves.

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The lira trimmed its losses on the news and was trading 0.4% lower at 6.1408 per dollar at 4:53 p.m. in Istanbul.

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