Turkey’s banks remain resilient against risks: Central Bank

ANKARA

Turkey’s banking sector is resilient against interest and exchange rate risks and its equity is above the level required to cover possible trouble, the Central Bank stated in its latest financial stability report on May 30.  

Geopolitical developments and uncertainties about economic policies are perceived as the main risk factors undermining global financial stability in the upcoming period, the report said.

Other potential risk factors include the limited size and impact of the expansionary fiscal policy projected to be implemented in the U.S., the emphasis on possible protective foreign trade policies, the policy normalization of the U.S. Federal Reserve, the possibility of a decline in the risk appetite due to political uncertainties in the European Union, and the concerns about the Chinese economy. 

“It is assessed that the Turkish banking sector is resilient to such risks thanks to its strong capital structure, asset quality and liquidity buffers,” stated the Central Bank. 

As a result of the ongoing global economic recovery and the partial decline in uncertainty about monetary policies, the volatility in financial markets has decreased and risk premiums have fallen, it also noted.

There has been a recovery trend in the economic activity thanks to the supportive measures and incentives introduced along with the strong progress in exports of goods, it added. 

“The improvement in credit conditions, which is triggered by macro-prudential regulations on consumer loans and the recent supportive measures taken for corporate sector financing, supports loan growth,” said the Bank, adding that the quality of loans was expected to keep improving thanks to the recovery in economic activity and the increase in collections.

The maturity of loans received by the banking sector from abroad continues to lengthen, which boosts the resilience of the sector against volatilities that may appear in international markets, the Bank also noted. 

The Central Bank maintains its stance that focuses on the price stability objective and supports financial stability, underlined the report.