Apr 10 2019

Turkey to lend state banks $5 billion to help troubled finance industry

Turkey will lend state-run banks 28 billion liras ($4.9 billion) of local bonds to help strengthen the capital of the banking system and deal with rising bad debt.

The capital of individual non-government banks will also be increased when necessary, Turkish Treasury and Finance Minister Berat Albayrak told a televised news conference in Istanbul on Wednesday.

The steps to help the banking system, much-anticipated by investors, would also include taking troubled loans off banks’ balance sheets with the help of local and foreign investor participation, Albayrak said. The measures would apply to the debts of the energy and real estate industries in particular, he said.

Albayrak announced the steps as part of a new economic plan designed to calm nervous investors and help lift Turkey out of an economic recession. The Turkish lira has continued a decline this year that totalled 28 percent in 2018, provoked by concern about populist policies by the government and political tensions with the United States.  

The lira was little changed at 5.69 per dollar after Albayrak spoke. The main index of banking stocks dropped 0.5 percent to 13,161 points in Istanbul.

Albayrak said the government would also cut corporation taxes in stages and require higher wage earners to pay a fairer share of taxes.

Budget discipline would continue in the same way it had before March 31 local elections, with savings and revenue-raising measures, he said.

Albayrak said Turkey would also reform the pensions system, helping to strengthen private provision of retirement funds.