Turkey’s Currency Swap Limit Could Bolster Central Bank Buffers

Turkey is limiting the amount of hard currency local banks can exchange for lira with foreign investors, a move that could benefit the central bank by pushing dollar liquidity into its official reserves.

The Banking Regulation and Supervision Agency, or BDDK as it’s known, will limit the amount of foreign-exchange swaps, forwards and other derivatives with a maturity of seven days or less to a maximum of 10% of banks’ equity, it said late on Wednesday.

By restricting the amount of dollars that banks can park with offshore funds, regulators may prompt Turkish banks in need of lira ...