Are Turkey’s banks strong enough to protect themselves against economic fluctuations?

Ahead of presidential and deputy elections to be held on 24 June 2018, Turkey’s economy is facing some difficulties such as excessive devaluation of Turkish Liras against US Dollar (as well as other major currencies), high interest rates and unbearable foreign trade deficit etc.

The government seemed to be desperate to find a cure to the swift increase in dollar/TL rate, in specific and it was not until Central Bank of Turkey finally intervened by increasing interest rates to stop the climbing of dollar/TL rate. As mentioned above, economic indicators such as inflation and current account deficit did not provide positive signals either.

Meanwhile there was recent news that FITCH had taken some Turkish lenders to rating watch negative which led to falling of shares of Turkish Banks for consecutive days and caused serious concern in the sector.

The question at this point was “Are Turkey’s banks strong enough to protect themselves against economic fluctuations?”, as many professionals, business people and investors in the country as well as abroad were concerned about the picture Turkey would paint in economy on a global level.

The answer came from the top authority in this area when BRSA(Banking Regulation & Supervision Agency)  officials stated that Turkey’s banks were in a position to protect themselves against cyclical fluctuations as the sector maintained its powerful and disciplined system and all such speculations and perception operations on the Turkish banking sector had turned out to be nothing more than unfounded claims, in the past as well.

The officials also shared that the sector had a healthy appearance in terms of its financial structure, compliance with international regulations and legal boundaries adding the capital adequacy ratio (SIC) of the banking sector was at 16.41 percent, higher than both the legal limit and the target ratio.