Decree No. 32 on the Protection of the Value of the Turkish Currency has been amended with effect from 2 May 2018 to keep FX borrowings at bay.

As anticipated, the Council of Ministers passed an amendment giving effect to significant changes to the well-known foreign exchange legislation of Turkey, namely Decree No. 32 on the Protection of the Value of the Turkish Currency, (originally issued in 1989 and amended from time to time) (the "Decree"). The amendment is published in the Official Gazette dated 25 January 2018 and will come into force on 2 May 2018 (the "Amendment").

The changes primarily relate to the rules regulating extension of loans, both onshore and offshore, as more particularly described below. There is a distinction made between loans denominated in TRY ("TRY Loans") and loans denominated in foreign currency ("FX Loans") and the familiar concept of foreign currency indexed loans have been disallowed.

There are a number of restrictions introduced to the legislation with a view to curtailing the use of FX Loans by local companies that do not regularly benefit from foreign currency denominated revenues. The other main restriction relates to a credit balance threshold of USD 15 million.

Accordingly, as further explained in detail below, Turkish residents having a credit balance of at least USD 15 million or meeting certain other criteria may, subject to certain conditions, obtain FX Loans. For the purposes of determining the threshold, "credit balance" is deemed to include outstanding onshore and offshore FX Loans as at the utilisation date of the proposed loan.