Albayrak: No crisis expected in Turkish banking sector

ISTANBUL - Reuters

Turkish Treasury and Finance Minister Berat Albayrak (R) met with British Finance Minister Philip Hammond in London on Sept. 3.

Turkish Treasury and Finance Minister Berat Albayrak has said he does not expect any problems in the banking sector, in stark contrast to recent warnings from ratings agencies that the lira sell-off could weaken lenders’ assets.

In the event of a problem at banks, Ankara would be willing to step in with support, he told Reuters in an interview late on Sept. 2.

“I have no reason to be worried at this stage. But we are aware how important the banking sector is. We are in a close coordination and cooperation with our banks and the (banking watchdog) BDDK,” Albayrak said

“We are not expecting any problems in the banking sector, but in case of a problem, we will support them in every way.”

He also dismissed concerns about debt, including in the private sector.

For years, Turkish firms have borrowed in dollars and euros, drawn by lower interest rates. The currency slump at around 42 percent over this year against the greenback has driven up the cost of servicing that debt and investors fear that banks could now be hit by a wave of bad loans.

Ratings agencies Moody’s and Fitch both sounded alarm about the outlook for banks last week, with Fitch estimating that banks’ foreign-currency lending now stood at around 43 percent of all loans.

Albayrak also said the current account deficit will be “considerably below” forecasts by year-end and “much stronger” in 2019.

The minister was visiting London on Sept. 3 for talks with Britain’s finance minister Philip Hammond, part of Turkey’s efforts to strengthen relations with Europe’s main economic powers as a dispute with Washington shows no sign of easing. He was in Paris last week and will go to Germany next week.

Relations with the United States, a NATO ally and major trading partner, have soured over a series of issues including Turkey’s detention of an American Christian pastor on terrorism charges and the U.S. sentencing of an executive from Turkish state bank Halkbank for busting sanctions on Iran.

Adding to the friction, the U.S. Treasury is investigating Halkbank for violating Iran sanctions. The bank has said all of its transactions were legal.

Turkey hired a U.S. law firm to look into Halkbank’s dealings with Iran and found that it did not violate U.S. sanctions, Albayrak said, adding Ankara does not expect the bank to face any fine.

“As a result of a months-long independent examination, it has been established that the bank had not violated primary and secondary U.S. sanctions against Iran,” he said.