To stabilize the Lira, Turkish regulators are stepping in and limiting the amount of foreign cash that banks can exchange for the Lira as law makers and regulators seek to limit volatility in the Lira.
The banking and supervision Agency (BDDK) is looking to limit FX swaps and other derivatives to a max of 10% of the banks equity.
This is a continuation from September of 2018 when the BDDK first stepped in to prevent short selling.
The lira has lost 3.4% of its value in December alone against the US Dollar, making it the worst performing currency in emerging markets.
The BDDK stepping in could encourage banks to use local market short term funding.
According to the Turkish central bank, Turkey’s forex reserves fell to $79 billion as of December 6. This is down from $96 billion just 2 years ago.