A call to help banks lend

Hurriyet Daily News with wires

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Turkey may face serious foreign exchange shortages next year and the authorities need to do more to maintain bank lending, warned the chief executive officer of Turkey's biggest publicly traded bank.

Turkey is beginning to experience the global credit crunch and the government should have taken measures earlier to deal with its impact on the country’s $660 billion economy, Bloomberg reported, citing İşbank CEO Ersin Özince.

Inadequate response
"We knew the world economy was slowing down for some time and we knew Turkey would be affected," he said in a speech in Ankara yesterday. "We knew that, but what did we do about it? We didn’t do much, including for the banking system."

A decision by the Central Bank to reduce the required amount of foreign exchange reserves that banks have to deposit with them to cover loans will not be enough to prompt banks to lend more to customers, Özince said.

Özince, who also leads Turkey’s Banks Association, or TBB, said Tuesday the banking system faced a "deposit bleeding" by around 10 percent. "This has occurred mostly due to the Turkish deposit owners’ concerns stemming from the problems abroad," he said.

Speaking at the Greek-Turkish Banking Forum, held by Greece’s Istanbul Consulate General, Özince commented on deposit outflow from the Turkish banking system in the recent period. "We suppose a proportion of the deposit went abroad and another portion was allocated for other investment purposes, rather than public banks."

Contrary to the concerns, foreign-owned banks operating in the country are "more determined to stand behind Turkey’s banks," compared to some private Turkish banks, he said.

Deficit in private sector
Speaking at the forum, TBB Secretary-General Ekrem Keskin said it was crucial to comprehend the course of saving balance well. After 2002, the public sector settled its savings deficit while the private sector faced an increasing deficit, he said.

Foreign banks in Turkey have reduced free float rates to a very low level., Anatolia News Agency quoted Keskin as saying. At present, foreign banks have a share of 25 percent in the sector, he said, and the rate of total loans to assets is above the sector’s average. The proportion of loans and securities to deposits in portfolios is 48 percent, which reveals these banks’ higher demand for non-deposit foreign financing.

Turkey is likely to face a swift contraction period as of the third quarter of this year, said Keskin. Regarding the current economy, he said there were problems on balance sheets because the cost for financing the private sector had risen and active prices were declining rapidly. "The main question mark for banks in the upcoming period is the impact on their customers’ financial structure. If banks do not see bad impacts, they will probably continue opening loans," he said.