Conditions Re-regulated in Central Bank's Foreign Exchange Conversion Support

The Central Bank of the Republic of Turkey is implementing a new practice in the regulation that encourages the conversion of foreign exchange earnings originating from abroad by companies into Turkish lira. With the changes made, the support mechanism has been made more effective and compatible with real economic activities.

Scope of the Practice

The Central Bank of the Republic of Turkey is transitioning to a new practice in the regulation that encourages the conversion of foreign exchange earnings obtained by companies from abroad into Turkish lira.

Statement by the Ministry of Treasury and Finance

Minister of Treasury and Finance Mehmet Şimşek announced that steps have been taken to increase the effectiveness of the CBRT's foreign exchange conversion support practice, and that the support mechanism has been made more effective, inclusive, and compatible with the real economic activities of companies.

Value-Added Based Upper Limit

According to the new implementation instruction that will enter into force on October 1, the amount of foreign exchange that can be sold within the scope of the support will be associated with value-added and an upper limit will be introduced.

The company's annual foreign exchange sales limit can be up to the value-added calculated by adding the annual operating profit obtained from the Revenue Administration and the 12-month labor force cost to be obtained from the Social Security Institution.

Foreign Exchange Position Requirement

Instead of the commitment not to buy foreign exchange, a foreign exchange position requirement has been introduced. Companies wishing to benefit from the support will be required to ensure that the ratio of their liquid foreign exchange assets to their net sales revenue or total assets does not exceed 10 percent.

Companies will document these ratios with a Foreign Exchange Position Notification Form valid for 15 days.

Supplier Companies and the Role of Banks

Supplier companies using intermediary exporters will be able to benefit from the support within the extent of their own limits. Direct support payments can be made to supplier companies.

In addition, while the duties and responsibilities of intermediary banks have been increased, banks have been granted the opportunity to charge a maximum of 1 percent commission from companies over the support amount, and control and audit mechanisms have been tightened.