Turkish banks tighten policing of borrowers over foreign exchange buying

Turkish banks are seeking written assurances from their customers that they will not purchase foreign currency with cash obtained via loans.

Clients must also promise not to buy cryptocurrencies or gold, the Dünya newspaper reported on Thursday. The signed documents must also be provided to extend overdraft facilities, it said.

The measures are part of macroprudential steps taken by the Turkish authorities to bolster the lira’s value. The so-called ‘liraization strategy’ is now the main focus of the central bank’s monetary policy. The lira has lost more than a quarter of its value against the dollar this year. It slumped briefly to a record low in December due to concerns over government policy, which included ordering the central bank to cut interest rates.

Banks are requesting that customers provide a detailed written explanation of how they will spend the borrowed money and are demanding three months of signed salary slips, Dünya said.

Demand for consumer loans, which was increasing at an annual pace of 67.1 percent in the first week of July, has slowed but continues to rise due to high inflation, the decreasing purchasing power of the lira and increasing financial needs during the holiday period, the newspaper said.

Average interest rates on the loans have risen to an annual 34.3 percent from 29.6 percent at the end of 2021, according to central bank data. Some banks are charging as much as 37 percent, Dünya said.

Inflation in Turkey accelerated to 79.6 percent last month, meaning borrowing costs, although rising, are still deeply negative for consumers when taking account of annual price rises.

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