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believe. The heavy external debt repayment schedule for May and June will probably keep the volatility in TL high,” Unlu & Co said on May 12.
Clearstream Banking and Euroclear Bank have taken a joint decision to temporarily suspend transactions in Turkish lira over the Bridge platform as of May 18, Clearstream Banking informed its customers in a May 14 statement.
The Bridge is an electronic communications platform that facilitates the efficient settlement of securities transactions between counterparties in Luxembourg-based Clearstream Banking and Belgium-based Euroclear Bank. Clearstream and Euroclear are among the top seven international settlement services providers.
The decision was taken because Turkish lira (TRY) transactions over the Bridge can no longer be settled under satisfactory conditions due to liquidity restrictions on the TRY in relation to coronavirus (COVID-19) difficulties, according to the statement from Clearstream.
Domestic settlements via the Clearstream Banking link to Turkey and internal settlements in TRY continue to operate as usual.
However, “as overdraft credit lines have been removed”, Clearstream Banking said it “strongly recommended [its customers] to keep a buffer amount in their cash account in TRY considering their securities settlement, trading in Borsa Istanbul (BIST) and cash transfer activity for the avoidance of possible risks of failed transactions”.
The Turkish authorities have been attempting to forestall offshore trading of the lira amid the recent renewed depreciation of the currency that saw it fall to a new all-time low against the dollar of 7.27.
“The decision [released on May 14 by Clearstream]... does seem to do the work of Turkish officials, making it more difficult for foreign parties to transact in lira... a short-squeeze [in lira] had already begun [last week] and this action could see it extended,” Marc Chandler of Bannockburn Global Forex told Bloomberg on May 16 after the Turkish markets community on Twitter woke up to Clearstream’s announcement.
Some FX trading platforms have also announced the removal of their Turkish lira currency pairs as trading instruments.
Clearstream’s announcement comes on top of its May 6 and May 7 announcements that followed Turkish banking watchdog BDDK on May 5 cutting local lenders’ swap limits with foreign counterparts to 0.5% of their equity.
On May 7, Clearstream removed customer overdraft credit lines.
On May 20, Turkey’s banking watchdog BDDK exempted Euroclear Bank and Clearstream Banking from limitations imposed on Turkish banks in their lira transactions with foreign institutions.
BNP Paribas’ foreign-exchange prime brokerage unit has stopped offering customers new lira trades, three people with knowledge of the matter told Bloomberg on May 18.
The BNP decision shows how difficult it has become for foreigners to trade the lira, Bloomberg commented.
The transactions were revived on May 25 after the BDDK exempted them from limits placed on local lenders’ transactions with foreign counterparts.
14 TURKEY Country Report June 2020 www.intellinews.com
