Top Turkish officials have lashed out at the banking industry, calling for lenders to slash interest rates and contribute to the economy.
Turkish President Recep Tayyip Erdoğan, who was speaking to the Chamber of Commerce and Industry in the Black Sea
province of Trabzon
late on Aug. 8, said he believed that state-owned banks would take steps to bring down the cost of credit for borrowers.
“Banks have almost doubled their profitability. This is a disaster,” he said live on television, as quoted by Reuters.
“I think it is our right to expect banks to lower interest rates and contribute to the country’s growth.”
Erdoğan, who wants banks to loan more money at lower rates to boost the economy, has repeatedly described himself as an enemy of interest rates. He has also said that high interest rates cause inflation.
“If the banking sector can be more courageous in funding the markets, our economic growth will pick up pace,” he said.Banks profitable enough ‘to make sacrifices’
Turkish banks are profitable enough that they have room to “make sacrifices” when it comes to some of their profits, Economy Minister Nihat Zeybekci said on Aug. 9, adding to the government’s pressure on banks to lower interest rates.
His comments, which were made during a meeting with Turkish businessmen, came a day after Erdoğan’s remarks.
“Our discourse on interest rates is quite clear. In order for Turkey to see further economic growth, to produce more, to create new jobs and to raise exports, financing must be abundant, cheap and easily accessible,” Zeybekci said.
“We have seen that Turkish lenders are profitable enough that they have room to make sacrifices in their profit margins…They should gain from the rising demand rather than the rising interest rates,” he added.
In March, the government increased the size of its Credit Guarantee Fund, which guarantees loans to small and medium-sized enterprises that could not otherwise get credit, by more than ten-fold to 250 billion Turkish Liras ($71 billion).
That has proven something of a windfall for banks, with the industry’s net profit rising by a third in the first six months of the year.
Loans are expected to rise by 16 to 18 percent this year, an official from the Turkish Banks Association said earlier on Aug. 8.
Turkish lenders gave “what they had” to offer loans to businesses in the first half of the year to give a boost to the economy and it is now time for lenders to take a rest in order to slash their operational costs, the association also said.