Moody’s reviews for downgrade ratings of 17 Turkish Banks

The review for downgrade of the banks’ ratings is driven by the need to assess risks arising from the evolving political and economic situation, namely the potential weakening of the government’s capacity and willingness to provide support to the banks in case of need, as implied by the review for downgrade on the sovereign rating, and the risk of further deterioration in the domestic operating environment, which could affect the banks’ financials, as potential increases in the cost of funding, reduced profitability, more limited capital generation capacity and weakening asset quality could weigh on results over the coming quarters, said Moody’s. 

While Moody’s said that it expects all rated financial institutions to be affected to some degree by the economic and financial implications of recent events, the review will assess each institution’s particular credit characteristics, in order to determine to what extent their individual credit ratings could display resilience or susceptibility to the aforementioned risks.

Sovereign debt rater Moody’s said late July 18 it was reviewing Turkey’s credit rating for a possible downgrade after the attempted military coup on the weekend.

A one-notch downgrade from the current Baa3 rating would push the government’s rating down into “speculative” or junk status.

“Despite the coup’s failure, Moody’s considers its occurrence a reflection of broader political challenges, as associated credit risks remain elevated,” Moody’s then said.