Financial resilience of firms, households remain strong: Report

ANKARA

The foreign exchange position of the corporate sector has improved with the liraization of their balance sheets, while the share of the Turkish Lira in households’ financial balance has increased significantly, in this way financial resilience indicators of firms and households remain strong, the Central Bank’s governor Şahap Kavcıoğlu has said in the bank’s biannual Financial Stability Report.

Thanks to the targeted loan policies, the loan composition has changed in the intended direction and the share of loans extended to export companies and small and medium-sized enterprises (SMEs) in total loans has increased, according to the governor.

Within the framework of the liraization strategy, policies are being implemented to permanently increase the share of the Turkish Lira in the financial system and to ensure that the lira is the currency of payment for all domestic investment and commercial transactions, he said.

“The steps we have taken began to yield results.” The Central Bank continues to implement the Liraization Strategy in order to create an institutional basis for permanent and sustainable price stability, he said.

Low indebtedness

The downward trend in household indebtedness, which is quite low in Türkiye compared to peer countries, continues, according to the bank’s Financial Stability Report.

The fact that the majority of household financial debts belong to wage earners with low-income volatility reduces households-driven credit risk in the banking system, it said.

“While the share of lira-denominated assets and non-deposit financial instruments in the households’ financial assets continues to increase, the deposit liraization rate also tends to rise.”

Households diversify their savings by increasing their investments in non-deposit financial assets such as equity securities, mutual funds and pension systems, according to the report.

“While the financial debt/financial asset ratio of the corporate sector has declined to the lowest level of the last 10 years, the positive trend in the liquidity, profitability and debt service indicators of firms continues,” it said.

The downward trend in the number of firms using FX loans continues and the firms’ capacity to meet their FX debt through export revenues is increasing, it added.
“These factors, which reduce the FX risk of firms, also limit the exchange rate risk of the corporate sector.”