Association warns against tough burdens on banks

ISTANBUL - Reuters

It is good to encourage loans for production or investment, but some of the burdens of such moves will have a bad effect on the sector, said TBB head Aydın (R). Company photo

Banking representatives said they understand the Turkish government’s cautious banking regulations and find them positive, but also warned against additional burdens on the banking sector, speaking at a meeting of the Banks Association of Turkey (TBB) yesterday. 

“As banking representatives, we understand some cautious moves and monetary policy tools of the government to affect banks’ tendencies. It is good to encourage loans for production, investment and exports, but some of the additional burdens of such moves will have a negative effect on the banking sector,” said TBB head Hüseyin Aydın. According to the data from the banking watchdog (BDDK), the return on equity of the sector decreased by 0.3 points to 15.4 percent in the first nine months of the year from the same period of the previous year.

He noted that due to such additional burdens, Turkish banks’ capital adequacy rates and capital incomes had fallen, encouraging these banks to choose more risky activities and lower their competitiveness. They are also pushed to become indebted to foreign sources. “We should all be cautious. The better the risks are managed, the more contribution we could all make to financial stability,” he said. 

Deputy Prime Minister Ali Babacan also touched on the issue of loans to encourage investment. “If loans are issued to increase exports, production and investment, and to support small and medium size enterprises, we will say ‘yes.’ However, we will say ‘no’ to loans that are issued for the sole purpose of increasing consumption, as the exhaustion of such a measure will only harm our economy,” he said on Nov. 13. 

New regulations ahead

Babacan noted the government will continue to implement more measures as required.
 
The BDDK announced new regulations bringing about a series of stricter rules on the use of credit cards, shortly after the government’s mid-term economic outlook was launched in October. The government solidified a much-anticipated step in its fight against high banking commission and fees with the approval of a consumer protection law that introduces tighter measures to the whole consumer market in November. The government is highly expected to make more regulations on the banking sector to decrease the country’s current account deficit and increase savings. 

TBB Secretary General Ekrem Keskin said it was not good to talk about the high profitability of the sector. “The latest burdens on the banking sector push banks to decrease their profitability forecasts.
The market cap of the banking shares has also been decreasing in the main stock exchange,” Keskin said. The profitability of the sector increased to 19.85 billion liras in September, an increase of 16.2 percent, according to a BDDK report released on Nov. 12, mainly caused by the sale of Yapı Kredi Bank’s insurance unit.