Recent Developments
Article 42(3) of the Capital Movements Circular dated May 2, 2018 (”Circular”) sets out that foreign currency denominated funds provided by banks and factoring companies to firms via purchasing existing or future trade receivables other than export and transit trade receivables are considered foreign currency denominated loans. However, the Circular was silent on (i) the scope of the FX loans; and (ii) the party of the underlying commercial relationship (i.e. buyer or seller) to be reported to the Risk Center of Turkish Banks’ Association (”Risk Center”) for the FX loans.
On July 20, 2020, the Central Bank of Republic of Turkey revised the Circular in line with the letter No. 394743 issued by Ministry of Treasury and Finance and provided clarifications regarding the following points:
Conclusion
The amendments clarified the scope of Article 42(3) of the Circular.