Gov’t behind Turkish banks targeted by rating agencies: Albayrak
ISTANBUL
International rating agencies have been making intense efforts to create a pessimistic view of Turkey’s banks, Treasury and Finance Minister Berat Albayrak said on Aug. 31, but added that the government vowed “to stand by its financial institutions.”
Speaking at a gathering of small to mid-size businesses, Albayrak said Turkey was going to continue to take steps to support and protect its currency.
“Rating agencies have been lining up in an effort to create a pessimistic view about our banks. They are trying to take aim at our lenders, but we are behind our banks whatever the rating agencies do,” he said in Istanbul.
His comments came after ratings agency Fitch, which downgraded 24 Turkish banks last month, said on Aug. 30 the 25 percent fall in the Turkish Lira since then had heightened risks and could lead to further rating cuts.
The underlying capital positions of the banks will weaken significantly due to the lira depreciation and declining asset quality, it said.
“Turkey faces a challenging financing environment given its large current account deficit, high foreign-currency debt and high inflation, exacerbated by deterioration in its economic policymaking credibility and its worsening political relationship with the U.S.,” the ratings agency said.
Fitch’s warning came two days after Moody’s downgraded its ratings on 20 Turkish financial institutions, citing the increased risk of a deterioration in funding. The operating environment is now worse than previously expected, it said.
Albayrak also noted that the government would keep taking steps in a bid to maintain the lira’s value against “all attacks that started in July and peaked in August.”
“In this vein, we have lowered the level of withholding tax on lira bank deposits, while raising the tax level on foreign currency deposits,” he said, signaling that more would follow.
Albayrak said the government knew the weaknesses of the economy as well as its strengths at a time when “a plot was initiated against the Turkish economy.”
“We know which steps must be taken. Nobody has doubts about the establishment of a stronger Turkish economy in the upcoming period,” he noted, adding that the government recently kicked off a robust fiscal policy.
“We will maintain the recently-launched saving campaign in the public sector in a much more effective manner,” he said, adding that the government must realize short-term and medium-term action plans to avoid any fluctuations in the economy.
