SUPPORTING THE CONVERSION OF FOREIGN CURRENCIES OF COMPANIES FROM ABROAD INTO TURKISH LIRA
INTRODUCTION :
Published in the Official Gazette on 26/01/2023, the “Communique on Supporting the Conversion of Firms Foreign Currencies of Companies from Abroad Into Turkish Lira” regulates the procedures and principles regarding the support to be provided to firms in the event that their foreign currency orgination abroad is sold to the Central Bank and converted into Turkish lira time deposits and participation accounts.
The implementation of this currency conversion support takes place in two different ways. As follows;
- Companies that sell their foreign currency originating from abroad to the Central Bank,
- Companies that are obliged to sell at least 40 percent of the foreign currency originating from abroad brought to the country to the Central Bank have been subjected to different procedures and principles.
Firms Selling Foreign Currency to the Central Bank;
During the sale of companies’ foreign currency originating from abroad to the Central Bank through the bank, provided that a commitment is made not to purchase foreign currency for a period to be determined by the Central Bank, foreign currency conversion support of 2% of the amount converted into Turkish lira at the conversion rate will be paid to the committed companies. The determination of the foreign currency to be sold to the Central Bank will be made by the bank. For these accounts to be opened, a commitment is taken from the relevant company not to purchase foreign currency for 3 months. If the relevant companies do not purchase foreign currency for 3 months, they will be entitled to foreign currency conversion support of 2% of the amount converted into Turkish lira.
Providing Foreign Exchange Conversion Support for the Conversion of Foreign Currencies from Abroad into Turkish Lira Time Deposits and Participation Accounts;
Provided that at least 40 percent of the foreign currency brought into the country is sold to the Central Bank, the remaining of the foreign currency brought into the country is converted into Turkish lira time deposits and participation accounts at the conversion rate and a commitment is made not to purchase more foreign currency than the amount sold to the Central Bank for a period to be determined by the Central Bank, foreign currency conversion support of 2 percent of the amount converted into Turkish lira at the conversion rate is provided to the committed companies.
Foreign currency originating from abroad refers to the foreign currency income earned by firms from residents abroad, including the foreign currency earned in return for services rendered to foreigners in Turkey, and the foreign currency brought into Turkey by firms from their foreign currency-denominated assets abroad.
The types of foreign currency to be converted, the due periods of Turkish lira deposits and participation accounts to be opened, and other procedures and principles shall be determined by the Central Bank.
Types Of Foreign Exchange Subject To Process:
The types of foreign exchange to be sold by banks to the Central Bank are US dollar, Euro and British Pound. For transactions denominated in other currencies, the foreign currency amounts in question shall be converted into US dollars, Euros or British pounds by the bank and sold to the Central Bank.
Non-Fulfillment of the Commitment Not to Purchase Foreign Currency;
- The commitments of companies not to purchase foreign currency within the scope of the practice of supporting the conversion of foreign currency originating abroad into Turkish lira are realized by submitting a letter of commitment prepared and signed by the relevant company to the relevant bank. The Bank shall keep these letters of commitment in its custody.
- Banks carry out checks on whether the commitment not to buy foreign currency has been fulfilled.
- Companies that are found to have failed to fulfill the commitment not to purchase foreign currency within the scope of this Application Instruction are notified to the Central Bank by the relevant bank. The date on which this notification is made is considered to be the date of detection of non-fulfillment of the commitment.
- In the event that the commitment not to purchase foreign currency given by the companies is not fulfilled, the foreign currency conversion support amounts are added to the positive exchange rate difference during the relevant period. For the period from the date of payment of the foreign currency conversion support until the date of determination of the non-fulfillment of the commitment, the interest to be calculated over the highest lending interest rate announced by the Central Bank valid on the date of determination is collected by the banks and transferred to the Central Bank. Credit requests of companies that do not fulfill their commitments will not be accepted for a period of one year from the date on which it is determined that the commitment has not been fulfilled.
Other Terms:
Within the scope of the practice of supporting the conversion of firms’ foreign currency originating abroad into Turkish lira, firms benefiting from the foreign currency conversion support will not be able to transfer Turkish lira or foreign currency abroad for derivative transactions and foreign exchange / precious metal purchase and sale purposes during the period of commitment, and the converted deposit and participation accounts opened will not be subject to derivative transactions.
In addition, banks shall check that all transactions to be carried out within the scope of this application are carried out in accordance with national and international standards regarding the prevention of laundering proceeds of crime and financing of terrorism, and that transactions are carried out in accordance with this Implementation Instruction. In case a violation is detected, the Central Bank shall be notified immediately by the bank conducting the transaction
Enforcement;
Within the scope of the 2023 Monetary Policy and Turkish Lira Strategy, in order to support the use of Turkish Lira in commercial life, this implementation communiqué on providing support for the conversion of companies’ foreign currency originating abroad into Turkish Lira has entered into force as of 26.03.2023.