Turkish banking sector maintains ‘strong’ capital structure, says EBRD

ISTANBUL

The Turkish banking sector maintains its “strong” capital structure despite fluctuations in the profitability of banks, Francis Malige, financial institutions managing director at the European Bank for Reconstruction and Development (EBRD), told state-run Anadolu Agency.

Malige said the EBRD has long-standing partnerships with Turkish banks, and the agreements they sign with them have recently been on the rise.

“Right now, through the financial sector, [our investments are] at 600 million euros [$668.6 million], but the game isn’t over yet, and we will continue to play until Dec. 31,” he said.

Malige said the EBRD’s investments in the Turkish economy reached $2.8 billion last year, including $1.3 billion invested in the finance sector.

The Turkish economy is on the road to recovery after having come out of a period of high inflation, showing a strong performance, he said.

The Turkish banking sector “has strong liquidity buffers, now, this isn’t to say that it doesn’t have challenges. The number one challenge that it’s coming out of now is the instability that has been created by the high interest rate environment, and, in fact, now that there is more certainty, and more stable macroeconomic policy, now banks can come out of this,” he said.

“I’m not concerned about the profitability of the banks; my main concern about the Turkish banking sector was really to see it focus its attention on financing its clients rather than focusing on itself … so, banks are strong, strongly capitalized and certainly we are very happy with our partner bank relationships,” he added.

Malige noted that for more than the last 12 months, orthodox macroeconomic policies have been implemented, resulting in “a massive improvement.”

“What matters to us is indeed the maintenance of these orthodox economic policies,” he said. “I think everyone welcomes the return, especially foreign investors, rating agencies and so on, take a lot of confidence in the fact that there are these new economic policies and they are there to stay.”

Malige said the bank encourages small- and medium-sized companies in Türkiye to invest in green and digital transformation, having launched a green economy program of $837.2 million.

“We are working with the banks, the regulators, and with our clients to make sure that we implement what is needed in order to minimize the impact of this mechanism,” he said.

Malige said the EBRD’s investments in the zone in southeastern Türkiye struck last year by earthquakes amounted to $669.6 million post-disaster, providing financing to businesses through banks.

He added that not all of the earthquake financing was allotted to businesses, as the bank continues to work with Turkish banks to assess the needs of businesses and determine future decisions.