Turkey’s Finance Minister Mr. Berat Albayrak is vociferously against capital controls of any kind, and Fitch rating agency doesn’t think such will be needed. Then, why, pray tell, is Turkey hectically seeking swap lines with other Central Banks? Why are Turkish banks banned from doing TL swap transactions with London counterparties? In another alarming development, ClearStream Banking, a leading currency settlement house has suspended TL transactions as of 15 May. Here is the announcement by Clear Stream:
Clearstream Banking1 informs customers that further to Announcements A20067 and A20069 and due to liquidity restrictions on the Turkish Lira (TRY) related to COVID-19, transactions in TRY over the Bridge can no longer be settled under satisfactory conditions. Clearstream Banking, together with Euroclear Bank, has therefore taken the joint decision to temporarily suspend this service.
18 May 2020
and until further notice, settlement over the Bridge in TRY will be suspended.
Impact on customers
For transactions over the Bridge
As of the end of the Clearstream Banking business day of 15 May 2020, all pending Bridge settlement instructions in TRY will be rejected. For this reason, Clearstream Banking strongly recommends that customers already start to cancel their TRY pending transactions and make new settlement arrangements with a different bridge-eligible settlement currency after agreement with their counterparty.
After the change of the Clearstream Banking business day on the evening of 15 May 2020, all new settlement instructions in TRY will be rejected.
Free of payment or against payment settlement in any other unrestricted currencies eligible over the Bridge continue to operate as usual.
Domestic and internal settlement
Domestic settlement via the Clearstream Banking link to Turkey and internal settlement in TRY continue to operate as usual.
For customer’s domestic market and internal settlement Instructions, as overdraft credit lines have been removed, Clearstream Banking strongly recommends that customers keep a buffer amount in their cash account in TRY considering their securities settlement, trading in Borsa Istanbul (BIST) and cash transfer activity for the avoidance of possible risks of failed transactions. Clearstream Banking will be limited to effecting customer settlement with the available funds on customer accounts.
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