What does the BRSA decision mean?

What does the BRSA decision mean?

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The Banking Regulation and Supervision Agency (BDDK) took an important decision on Friday, briefly blocking the granting of Turkish lira loans to companies with foreign currency assets above 15 million lira. From now on, a company whose foreign currency liquidity exceeds 15 million lira and exceeds 10% of total assets or annual sales will not be able to obtain new loans in lira.

A LITTLE MORE SOFTENING WITH FURTHER EXPLANATION

BRSA also made a statement yesterday, regarding the companies covered by the ruling, “Being an independent audited company, the company’s foreign currency (FX) liquidity having a TL equivalent of more than TL 15 million, and the TL equivalent of the company’s FX cash assets of last year’s total assets or net sales the greater of its revenue exceeds 10%… For a company to be in scope of the decision, all three conditions must be met at the same time,” he shared.

With the statement made yesterday, with the statement that “the other monetary assets of corporations consisting of securities issued in foreign currencies by residents and debt securities such as Eurobonds do not fall within the scope of cash assets in currencies specified in the resolution”, Eurobonds and private currencies Sector bonds were excluded from the decision a little more than the previous press release revealed.

For those who are curious about the details of this decision, we will open it below, but seek an answer to the most curious “why” question.

THINK TOGETHER ON TWO DECISIONS

Our research shows that there are 3 distinct reasons behind the scenes. The most interesting of these 3 reasons, which we cannot list in terms of importance, is the BRSA’s desire to prevent this as companies have started to use the Central Bank’s cheap credit policy in their favor . The following is stated: Some large credible companies take out large loans from private and public banks. These companies sell the credit they cost 20% with 50-60% on the London exchanges. He writes profit as easy income. How this sold Turkish Lira is later used is unknown. You know, in order not to harm the TL, it was decided not long ago to allow the “dedicated swap” market. So we said abroad that you can buy TL, but it is necessary to use it in our stocks and bonds. Another decision taken by the BRSA two days ago confirms the accuracy of this justification.

In yesterday’s statement, the statement that “securities and shares of corporations issued in foreign currency by nonresidents and other monetary assets such as reverse repos with nonresidents will also be included in the calculation of the amount of cash assets in foreign currency under the Decision.”

WHAT DOES THE DECISION SAY?

What does the decision say? In the event that non-banking and financial institutions engage in derivatives transactions with non-residents, cash commercial loans in TL and FC should be extended to such persons after the date of this Decision; in the calculation of the capital ratio; Regardless of the approach used to calculate the amount subject to credit risk, a risk weight of five hundred percent will be applied, regardless of credit risk mitigation techniques, credit ratings and immovable mortgages . In summary, it is made impossible for companies other than banks to make swaps with foreign institutions. It is becoming increasingly difficult for companies to trade derivatives.

THEY TAKE A LOAN, THEY HAVE CLOSE THE HOUSE AND THE CAR

The second and equally important reason is that the owners of the businesses that receive loans in Turkish liras drive up prices in these areas by buying houses and cars with this loan. In other words, the direct contribution of credit expansion to inflation. Some companies are even said to play a role in driving up prices by buying raw materials and intermediate products in areas that are not their area of ​​business. If we give an example, the company operating in the field of textiles can store iron and steel predicting that the prices will increase. The loan for this is, of course, a commercial loan taken from banks at a cost of 20-25%.

THEY HOLD CURRENCY AND BUY TL CREDIT AND SPEND IT

The third reason, just as important, is the existence of companies that do not touch this asset while they have assets in foreign currencies, and make their payments with loans in TL from which they withdraw. Yesterday’s press release clearly draws attention to this situation by saying that “it has been determined that some companies are hoarding foreign currency even though they do not need it”. The management of the economy says “stop” to companies that hold foreign currency and gold for speculation (in case its value increases) in the bank, and then meets their needs with cheap loans. If you have a currency, change it first. Do not use the cheap loan interest for production and investment for your own benefit, and change the currency so that the exchange rate is relaxed. Needless to say, of course, it is unclear which company will need foreign exchange and when, but it seems that there is no problem with not holding foreign exchange for exporters. Because these companies already use foreign currency loans and there is no obstacle to this with the regulations.

THERE ARE EXCEPTIONS BUT

Some regulations make exceptions to this rule, but it is not clear which company will strive to take advantage of these exceptions. Here are those details and exceptions:

– Limited to companies which cannot resort to borrowing in foreign currency in accordance with the relevant legislation, that these companies present a net position gap in foreign currency within 3 months from the date of their request to the bank by organizations independent control bodies approved by public authorities, Accounting and Auditing Standards Authority (independent auditing companies). institutions) depending on the review to be done on their most up-to-date financial statements, and that they apply to the bank with documents approved by these institutions, these companies will receive commercial loans in cash in TL only within 3 months following the date of application, limited to the identified vacancy.

– Companies with foreign currency liquidity not exceeding TL 15 million are required to have their current foreign currency liquidity and current foreign currency liquidity and last year’s net turnover determined by the independent audit firm based on their most recent financial information. declarations and to obtain liquidity in foreign currency for the entire term of the loan which they will use In order to declare and undertake that the TL equivalent of their assets does not exceed TL 15 million, and to ensure that the said declaration and this commitment are checked by the bank, within the first 10 working days of each month, according to the balance sheet of the previous month, the liquidity in foreign currencies, the total assets and at the end of the previous month, provided that they transmit the current value of the last 12 months. net proceeds from sales to the bank, they will be exempt from this application.

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