Ankara, Aug 13 (IANS): The Central Bank of Turkey (TCMB) on Monday announced it will provide all required liquidity to ensure financial stability after the collapse of the Turkish lira against the US dollar. The crisis has rattled markets around the world.

The bank's announcement came after a widening diplomatic spat with the US. Investors were not reassured. Although the lira rose slightly, it still hit a new record low against the dollar and stock markets in Europe and Asia fell, the BBC reported.

The TCMB explained in a press release on its official website that it was set to reduce the limits of foreign exchange reserves allowed to Turkish banks in order to withdraw liras from the market, provide liquidity and stabilize the value of the Turkish currency.

"In the framework of intraday and overnight standing facilities, the Central Bank will provide all the liquidity the banks need," the bank said.

It pointed out that the "discount rates for collaterals against Turkish lira transactions will be revised based on type and maturity."

Before the bank's announcement the lira was down 9 per cent before recovering slightly to be 6 per cent lower in late morning trading in Turkey.

On Monday, benchmark stock indexes in Tokyo, Hong Kong and Shanghai were all down more than 1.5 per cent in late morning trading. The Shanghai Composite later recovered from a fall of 1.7 per cent to trade with much smaller falls in afternoon trading.

In early trading in Europe, London's 100-share index was down 0.5 per cent, while the German and French share markets were down by similar amounts.

Turkey's Interior Ministry said it was taking legal action against 346 social media accounts it claimed had posted comments about the weakening lira "in a provocative way".

The central bank said it expected that the discounted value of "banks' current unencumbered collaterals" will increase to about 3.8 billion Turkish liras ($564 million).

On the other hand, the country's Banking Regulation and Supervision Agency announced that it will limit the transactions of Turkish banks with foreign investors to 50 per cent of the capital, and that the rate will be calculated on a daily basis.

Turkish Finance Minister Berat Albayrak said that the government was set to unveil an action plan later on Monday to stop the fall of the Turkish currency.

According to analysts, the collapse of the Turkish lira was, in part, attributed to diplomatic tensions with the US.

The currency slide worsened on Friday, when US President Donald Trump approved the doubling of tariffs on Turkish steel and aluminium, following Ankara's refusal to free an American pastor who has been in detention in Turkey for nearly two years.

Turkish President Recep Tayyip Erdogan vowed not to allow Ankara to be "brought to its knees" and spoke of a plot against his country.