Turkey and South Korea sign a bilateral swap agreement
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The Central Bank of the Republic of Turkey (TCMB) and the Central Bank of South Korea have signed a bilateral swap agreement allowing for the exchange of local currencies of up to 2.3 trillion Korean won or 17.5 billion Turkish Liras (approximately 2 billion US dollars).
As reported by the state-run Anadolu Agency (AA), the Bank of Korea announced the agreement in a written statement today (August 12), briefly saying, "The effective period is three years from today, and could be extended by mutual agreement between the two sides."
The agreement was signed by Şahap Kavcıoğlu and Juyeol Lee, the Governors of Turkey's and Korea's Central Banks, respectively.
The bank has said that "the swap agreement aims to boost bilateral trade through a swap-financed trade settlement facility and promote financial cooperation for the economic development of both sides."
While the officials of the Central Bank of Turkey has confirmed the agreement, they will reportedly make a statement later.
Most recently, Turkey has updated its swap agreement with China, increasing the amount from 2.4 billion to 6 billion dollars as of June 15. It was announced that there were ongoing talks with Azerbaijan, Malesia, South Korea, Russia, Britain, Qatar and some Asian countries for swap agreements. Turkey also has a swap agreement (15 billion USD) with Qatar.
What is Swap?Investopedia website explains swap briefly as follows: "A swap is a derivative contract through which two parties exchange the cash flows or liabilities from two different financial instruments. Most swaps involve cash flows based on a notional principal amount such as a loan or bond, although the instrument can be almost anything. Usually, the principal does not change hands. Each cash flow comprises one leg of the swap. One cash flow is generally fixed, while the other is variable and based on a benchmark interest rate, floating currency exchange rate or index price. "The most common kind of swap is an interest rate swap. Swaps do not trade on exchanges, and retail investors do not generally engage in swaps. Rather, swaps are over-the-counter contracts primarily between businesses or financial institutions that are customized to the needs of both parties." |
(HA/SD)