Feb 27 2019

Turkey should clean up its banking industry, top business group says

Turkey should implement a plan to remove bad loans from banks’ balance sheets, the Turkish Industry and Business Association (TÜSİAD) said.

The measure is needed to clean up the industry and open the way for new lending to businesses, Simone Kaslowski, who was elected president of TÜSİAD last week, said at a conference in Istanbul, according to Hürriyet newspaper. TÜSİAD represents Turkey’s biggest companies.

Turkey has faced growing calls from ratings agencies, analysts and investors to deal with a mounting stock of non-performing loans, which have swollen after a currency crisis peaked in August. Standard & Poor’s warned last week that NPLs could increase to 8 percent of total loans unless measures were taken.

Kaslowski said similar steps had been taken by South Korea and Sweden with some success. He said that without such a policy, it would take much longer for Turkey’s economy to return to growth.

The Turkish authorities have carried out a stress test of banks to ascertain capital needs, but speculation that a clean-up of the industry would follow has yet to be confirmed.

Turkey’s first priorities should be to re-establish confidence and stability, Kaslowski said, adding that companies need to continue to borrow from abroad without any hitches. Such confidence can only occur with a clear and transparent programme of policies, backed up by commitment to institutional independence and the free market economy, he said.