Turkey plans to buy state banks' debt to boost capital

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Fresh capital is expected to be pumped into the lenders to back President Recep Tayyip Erdogan’s efforts to prop up growth with cheap loans.

Wednesday 10, April 2019

(Bloomberg) --Turkey plans to shore up its battered banks by injecting capital into the biggest state-owned lenders for the second time in six months.

Seeking to sustain the flow of credit into the slumping economy, the treasury is considering buying bonds that will be issued mostly by Ziraat Bankasi and Turkiye Halk Bankasi.

The blueprint is likely to be announced by Treasury and Finance Minister Berat Albayrak this week.

The banks are being tasked with salvaging industries and helping consumers to pay off credit cards or get below-market rates on mortgages in the hope that private firms will follow. So far, a spike in bad loans and a surge in businesses seeking to restructure debt is causing their private counterparts to rein in credit.

The Government has already recapitalised three of its banks by selling bonds to its unemployment fund in October. Two private banks, Akbank and Italy’s UniCredit’s Turkish unit Yapi Kredi Bankasi, have also boosted their capital levels.

Turkish lenders are being held back by record high loan-to-deposit ratios after a credit binge in 2017 stoked by a state-backed fund that guaranteed some loans. that is come to bite lenders and borrowers alike after a plunge in the lira pushed up the cost of servicing loans in dollars or euros, while also making it more expensive for banks to raise offshore capital.


TAGS : Ziraat Bankasi, Berat Albayrak, Turkiye Halk Bankasi, Yapi Kredi Bankasi, Akbank, President Recep Tayyip Erdogan, Lira

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