Moody’s downgrades 20 Turkish financial institutions
Ratings agency Moody’s has downgraded 20 financial institutions, citing the increased risk of deterioration in funding.
The rating action followed Moody’s recent decision to downgrade Turkey’s government bond rating to Ba3 from Ba2 and assign a negative outlook, and the resulting lowering of the ceiling for foreign currency deposits to B1 from Ba3 on Aug. 17.
“The downgrades primarily reflect a substantial increase in the risk of a downside scenario, where a further negative shift in investor sentiment could lead to a curtailing of wholesale funding,” Moody’s said in a statement on Aug. 28.
It lowered its “standalone baseline credit assessments” of 14 lenders by one notch, and those of four other banks by two notches. It downgraded the “corporate family ratings” of two finance companies by a notch.
In the next 12 months, around $77 billion of foreign currency wholesale bonds and syndicated loans, or 41 percent of the total market funding, needs to be refinanced, Moody’s said.
Turkish banks hold around $48 billion of liquid assets in foreign currency and have around $57 billion in compulsory reserves with the Central Bank, Moody’s said, adding the latter would not be entirely available.
“In a downside scenario, where investor sentiment shifts, the risk of a prolonged closure of the wholesale market would lead most banks to materially deleverage, or to require external funding support from the government, or the Central Bank,” it said.