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More Macroprudential Measures Rolled out to Encourage Liraization

TURKEY
EM Bulletmarkets-real-timeBulletEmerging Markets
  • Real sector confidence data released this morning showed a further deterioration in sentiment – mimicking the drop in consumer confidence in recent weeks. Real sector confidence dropped to 104.6 from 107.0, the lowest since the depths of the COVID-19 crisis in 2020.
  • Late yesterday, the Turkish banking regulator launched fresh macroprudential measures on Liraization, changing risk rules surrounding banks’ usage of TRY swaps contracts. The measures see banks imposing a 500% risk weighting to TRY or FX loans – effectively increasing the cost of lending TRY to overseas investors.
  • Changes were also made to mortgage lending criteria, with no lending for homes valued at more than TRY 10mln (~$575,000). Restrictions are also put in place on homes worth under TRY 2mln, with lending criteria contingent on energy efficiency.
  • Hurriyet confirms that the government’s budget amendments were accepted by parliament, with Finance Minister Nebati repeating the themes evident in yesterday’s CBRT statement: “we anticipate the exchange rate pressures on inflation will decrease with the decreasing external financing need.”
  • Sabah write that talks held between Erdogan and Saudi Arabia’s MBS this week resulted in three proposals for the two countries: joint investments in third party countries, a Turkish trade fair in Saudi Arabia and the possible participation of Turkish firms in $3.3trl of Saudi infrastructure projects. On a possible swap line deal, the piece reports that technical discussions are set to continue.
  • Elsewhere, diplomatic ties with Israel appear to be improving, with Sabah reporting that a summit held between the Israeli and Turkish foreign ministers resulted in a decision for a new diplomatic representations between the two states – meaning ambassadors will now be active in both states.
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  • Real sector confidence data released this morning showed a further deterioration in sentiment – mimicking the drop in consumer confidence in recent weeks. Real sector confidence dropped to 104.6 from 107.0, the lowest since the depths of the COVID-19 crisis in 2020.
  • Late yesterday, the Turkish banking regulator launched fresh macroprudential measures on Liraization, changing risk rules surrounding banks’ usage of TRY swaps contracts. The measures see banks imposing a 500% risk weighting to TRY or FX loans – effectively increasing the cost of lending TRY to overseas investors.
  • Changes were also made to mortgage lending criteria, with no lending for homes valued at more than TRY 10mln (~$575,000). Restrictions are also put in place on homes worth under TRY 2mln, with lending criteria contingent on energy efficiency.
  • Hurriyet confirms that the government’s budget amendments were accepted by parliament, with Finance Minister Nebati repeating the themes evident in yesterday’s CBRT statement: “we anticipate the exchange rate pressures on inflation will decrease with the decreasing external financing need.”
  • Sabah write that talks held between Erdogan and Saudi Arabia’s MBS this week resulted in three proposals for the two countries: joint investments in third party countries, a Turkish trade fair in Saudi Arabia and the possible participation of Turkish firms in $3.3trl of Saudi infrastructure projects. On a possible swap line deal, the piece reports that technical discussions are set to continue.
  • Elsewhere, diplomatic ties with Israel appear to be improving, with Sabah reporting that a summit held between the Israeli and Turkish foreign ministers resulted in a decision for a new diplomatic representations between the two states – meaning ambassadors will now be active in both states.