Istanbul’s bank stock index fell 1.59% on April 13 after Turkey’s regulator sharply curbed permissions for lenders to perform foreign exchange swaps.

The move was seen as a further clampdown on volatility and speculation in the Turkish lira (TRY), which on April 13 again breached the 6.80-to-the-dollar threshold as it continued to trade at weak levels not seen since the summer 2018 lira crisis.

More selling pressure was felt by bank shares on the BIST Banks (XBANK) sub-index after the government dismissed reports that it might make a funding deal with the International Monetary Fund (IMF) in the face of economic pressures generated by the coronavirus (COVID-19) outbreak.

On April 12, Turkey’s banking watchdog (BDDK) cut the limit for banks’ foreign-exchange swap, forward and option transactions with foreign entities to 1% of a bank’s equity, from 10% previously.

It said it made the amendment to support measures taken to protect financial stability and manage risks raised by the coronavirus pandemic.

“Given the government’s dismissal of IMF story and banking watchdog’s swap limitation rule, those liquid and fast runner stocks may face some selling pressure today and in the next sessions after all foreigners come back from Easter holiday,” said DenizInvest in a April 13 research note.

Before the 2018 currency crisis, there was no limit on such FX trading. But a series of cuts since then, including a reduction to 10% from 25% in February of this year, has severely constrained a once popular overnight swap market in London.

“The BDDK’s new move means it has eliminated the opportunity to use the London swap market. According to our calculations, the total swap purchase is just over $10 billion. This will fall back to under $1 billion,” a forex trader of an Istanbul-based bank was quoted as saying by Reuters.

“Since a limitation was imposed on the swap step that was used by foreign investors for speculative position buying, it will provide support for the lira in the initial stage,” he added.