Banks to set aside provisions for $8 bln loans

ISTANBUL

Turkey’s Banking Regulation and Supervision Agency (BDDK) has asked local lenders to set aside provisions for a total of 46 billion Turkish Liras (around $8 billion) worth of loans by the end of the year.

“According to the asset quality review process, it has been determined that the total amount of loans that should be classified as NPL [non-performing loan], mostly comprising of loans to construction and energy sectors, amounts to 46 billion,” the BDDK said in a statement.

The regulator noted that it sent to the related banks the official instructions regarding the loan reclassifications and maintaining additional level of provisions for expected credit losses.

The impact analysis conducted on the July 2019 financial statements of the banks reveals that the capital adequacy ratio of the banking system decreases by 50 basis points, from 18.2 percent to 17.7 percent, and the level of NPL increases from 4.6 percent to 6.3 percent, according to the BDDK.

The globally accepted minimum capital adequacy ratio set by the Basel Committee on Banking Supervision is 8 percent, the BDDK, however, has been implementing a target capital adequacy ratio of 12 percent.

The BDDK says it conducts financial safety analysis, including asset quality reviews, on a regular basis and gives the necessary feedback to banks for implementing relevant actions for the reclassification of loans and enhancing their financial soundness.

“Common Equity Tier 1, Additional Tier 1 and Tier 2 capital of banking system in general and government-owned banks in particular, excluding the impact of retained earnings, have been increased by 49 billion liras in the last one-year period,” it said.

The regulator added that the studies conducted by the BDDK show that the banking system preserves its safety and soundness and the current level of capital is sufficient to manage asset quality related risks.