Turkey has committed to the biggest plan to bolster its banks since a financial crisis of 2001, which almost wiped out the industry.
Thursday 11, April 2019
(Bloomberg) – The Turkish Finance and Treasury Minister said that the government will inject fresh capital into state-owned lenders and oversee the formation of two funds to take on some bad loans to help the sector.
The Turkish government will issue TRL 28 billion ($4.9 billion) of bonds and place them at state banks, to finance the effort.
The finance minister unveiled the measures as part of a package of reforms aimed at resurrecting the recession-hit economy, with banks struggling to escape a rising pile of bad loans and increased demands from companies to restructure their debt.
Additionally, the blueprint echoes the $77 billion rescue for lenders during the 2001 financial crisis and it marks the second time the has government acted to shore up its lenders after last year’s currency crash.
Hakan Ozyildiz, a former Deputy Undersecretary at the Finance Ministry, said, “This plan will increase the debt burden on the Treasury, in 2001, the same type of bonds was issued to cover the state’s losses.”
Berat Albayrak, the Treasury and Finance Minister, said that capital buffers will be strengthened once the new plan is implemented, adding that private lenders are working separately on their own plans to raise capital and will do so when needed.
The treasury chief’s road map also includes programmes to reorganise soured real estate and energy borrowings through debt and equity swaps. Banks will work to carve out non-performing loans in the sectors and transfer them to two funds, which will be run by banks as well as local and international investors.
“The non-performing loans ratio of 4.2 per cent is considered a very good level by our counterparts as well as, we are taking a step that will further enhance the quality of assets of the sector,” added Albayrak.