Turkey banks to kick-start lending

Turkey forced banks to take losses on $8 billion in bad loans this week to kick-start lending and boost its economic recovery after losing patience with them, bankers, senior government officials and industry advisers told Reuters.

Ankara’s most aggressive move yet to cure a hangover from Turkey’s 2018 currency crisis has left banks scrambling to meet a year-end deadline to restructure loans or ready them for sale.

Turkey’s bank watchdog had been calling bank executives in recent weeks, after three months of talks failed to deliver action, to tell them what portion of loans they should reclassify as non-performing and to make provisions, two sources said.

On Tuesday, a year on from the darkest moments of the currency crisis, the BDDK watchdog went public with its requirement for banks to write off loans totalling 46 billion lira ($8.1 billion) as non-performing loans (NPLs).

The move was driven by the government’s desire for banks, especially more cautious private ones, to extend more credit and help meet President Tayyip Erdogan’s goal of 5 per cent economic growth next year, five sources said.

“The government has lost patience and wants action. We knew that nothing was happening in August, so it was just a matter of who was going to lose patience first,” one of the sources, a senior banker involved in talks with the BDDK and government, told Reuters.

The banks had hoped Turkey’s Treasury Ministry would do more to shield them from losses, telling the BDDK and government officials that fiscal policies had in part led to the downturn, a senior government official and the senior banker said.

The BDDK referred Reuters to its statement on Tuesday, while the Treasury declined to comment on the BDDK move.

Reuters