(Bloomberg) -- Turkey’s banking regulator has advised commercial lenders not to distribute dividends from profits in 2021, when a currency crash eroded banks’ cash buffers, people with direct knowledge of the matter said.

The regulator, known as BDDK, passed its recommendation to the lenders via Turkey’s banking association, but has yet to send a formal, written notice banning dividend payments, according to the people, who asked not to be named due to the sensitivity of the matter.

BDDK and the banking association both declined to comment.

Lenders were permitted to pay as much as 10% of their net income as dividends last year due to successful risk management during the pandemic. Despite quickening inflation, the central bank has started an aggressive cycle of rate cuts, which eroded confidence in the lira and led the currency to be the worst performer in emerging markets last year with more than 40% depreciation against the dollar.

Turkey plans to inject 51.5 billion liras ($3.8 billion) into state banks in order to minimize the effect of the weak lira on state banks.

Turkey May Spend $3.8 Billion to Boost State Banks’ Capital

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