CBRT Introduces New Exception on Utilization of FX Loans

Recent Development

The Central Bank of Turkey (“CBRT“) amended the Capital Movements Circular to clarify certain points and provide a new exception to the rules regarding the FX loan borrowings of Turkish subsidiaries of multinational companies.

What Does the Amendment Say?

• Fully owned (directly or indirectly) Turkish subsidiaries of multinational companies will be able to utilize FX loans from other group companies resident abroad without being subject to the FX borrowing restrictions. However, they must provide the companies’ share ownership documents to the intermediary bank.

• Whether a Turkish bank can issue a foreign currency denominated letter of guarantee whereby the applicant and beneficiary are Turkish residents is now clarified. These letters of guarantee can be indexed to foreign currency (payment to be made in Turkish lira based on the rates prevailing at the date of payment) if they are issued for trading or occupational purposes.

• Public institutions, within the scope of their obligations in international agreements, will be able to extend FX loans to their affiliates. If there is a loan limit set out in the international agreements, the amount of FX loan to be made available by the public institution cannot exceed the loan limit.

Conclusion

The amendment provides a new exception for the utilization of FX loans and clarifies certain legislative points.