Deposit maturities in Turkey are short and historically there has been a close relationship between the short term market rates –on which the CBRT has been decisive- and the Turkish lira deposit rates.
Past experiences show that banks are able to roll over more than half of their external debt even in the most unfavorable economic and financial conditions.
Banks’ long-term borrowing tendency has strengthened due to the measures introduced. The change in the maturity composition of external debts in favor of the long term increases the sector’s resilience to liquidity shocks and supports financial stability.
The borrowing preferences of the corporate sector are important in terms of financial stability. It is obvious that the FX loan utilization by firms with no FX income is very risky. FX loan costs, which are supposed to be low, may significantly exceed the TL loan costs depending on exchange rate developments.
Turkey has recently achieved significant progress in the field of credit reporting. However, despite its magnitude, this progress falls short of contributing to financial inclusion.
In September 2016 Banking Regulation and Supervision Agency introduced some amendments to macroprudential policy regulations. These changes had a favorable impact on the growth rates of housing loans and general-purpose loans, which played an important role in the recovery in the annual growth rate of total retail loans in the last quarter of 2016.
In addition to macroprudential policies implemented by policymakers in Turkey recently, the number of countries/banks that provide funds to the Turkish banking sector has also increased steadily, and regions outside the traditional financial centers have also become important sources of funds for the Turkish banking sector.
Importance of policies that aim to broaden the funding options such as deepening of capital markets, and venture and risk capital is revealed in this study.
Although different financial stress periods have distinctive dynamics, the historical course of external debt rollover ratio can act as a reference in assessing the current situation.
In this study, the MFA-score, which measures the firm’s financial soundness with a high predictive power, was developed by using the balance sheet data of the real sector firms quoted on the BIST. As a result of our analysis, we found that distressed firms have a small share in terms of asset size, meanwhile, the firm debt and FX open position mostly concentrate in firms that are financially sound.
In 2017, banks expanded their deposit base on the one hand and used alternative funding sources on the other. In the upcoming period, continued diversification of funding sources will contribute to both financial deepening and the decline in funding costs.
Derivatives are not new to Turkish firms. They are already actively using derivative transactions, primarily swap, forwards and options. Moreover, the cost of forwards that are used by the corporate sector in managing the exchange rate risk is akin to banks’ costs.
The length of time for return on housing investments in Turkey increased until mid-2016 after which this trend reversed in line with the downtrend in house values.
Turkey moved up to rank 33 from rank 43 in the World Bank’s 2020 Ease of Doing Business Ranking, making significant progress by leaping 10 ranks at once.
Recently, the share of financing companies in household liabilities has increased owing to the moderate growth in bank loans and the opening of new financing companies.
The NSFR, which will be effective starting from 2018, will enable comprehensive measurement of the liquidity risk by taking into account the maturity of the assets and liabilities on banks’ balance sheets.
Household indebtedness in Turkey is lower than in peer countries. However, it is of critical importance for a balanced growth that factors such as the propensity to save, financial stability, current account balance, and changes in the general price level are taken into account when managing this process.
The liraization strategy lays out a comprehensive policy framework that has been continuously improved to ensure that the Turkish economy achieves permanent price and financial stability.
We observe that global liquidity has an impact on the magnitude of interest rate transmission. Yet, financial regulation is strengthened on a global scale and macroprudential policies are implemented in a broader spectrum, which may have weakened this impact.
The findings of our study underline that the conjunctural and structural policy framework to be developed to anchor inflation expectations is important in terms of lowering the borrowing costs and enhancing the effectiveness of monetary policy in emerging market countries.
Concerns over NIR that was regarded as a life-saver at the beginning have increased. It is observed that some central banks are watching for an opportunity to exit this implementation.
We assess that the growing transaction demand, the new bond issuances over the years and the maturity axis filled by the shifting maturities of previously issued bonds provide the adequate conditions necessary to form a healthy yield curve.
“Shadow banking” activities, which have a relatively low share in Turkey’s financial markets, are closely monitored as they constitute a factor of vulnerability on a global scale.
The Turkish Statistical Institution has recently made a revision in the national account system. Due to the revision, one of the most important differences between the series was in savings rates. However, the improvement observed in the savings rate in the aftermath of the national income revision does not eliminate the need for structural reforms in this area.
Approximately 6.1 billion TL worth of savings have been brought into the economy since the second quarter of 2016 as a result of policies towards increasing savings. Of this amount, 4.6 billion TL came from AES, 1.3 billion TL from gold-backed securities investments, and 175 million TL from housing and dowry accounts.
Among the measures recently taken in emerging economies against the foreign currency exposure of the corporate sector, decisions by the central banks of India and Indonesia stand out.
Misconduct can be a severe factor of fragility for financial institutions. Misconduct that increases particularly in periods of accelerated financial innovations not only causes damage to institutions but also leads to systemic risks by triggering a confidence crisis that may spread through the whole system through the contagion effect.
The indicator to be employed to set the buffer ratio should measure the sectoral stress accurately, be applicable at an international scale, and be simple, clear and rule-based, as those qualities are directly connected to the effectiveness and credibility of the CCyB.
This blog post evaluates the results of the Cash Usage Habits Survey conducted by the Central Bank of the Republic of Türkiye in September-October 2020 to understand the cash usage habits in our country and to examine the importance of cash in payment methods.
We should keep in mind that the capital adequacy ratio, which moves downward due to exchange rate developments in the short term, can rebound owing to the rise in profitability in longer terms.
While a substantial number of firms had access to finance with the expansion of the Credit Guarantee Fund (KGF) facility, the majority of KGF guaranteed loans were used by corporates that were already borrowers of bank loans. Moreover, findings suggest that the KGF guarantee had significant implications in terms of credit costs and extension of maturities.
The Markets in Financial Instruments Directive II (MiFID II), which took effect on 3 January 2018, is intended to foster integration between EU financial markets, strengthen investor protection and improve transparency for all market players.
All stakeholders led by commercial banks are expected to contribute to developing and proliferating gold-related financial instruments to ensure the success of the process.
There appears to be a correlation between the developments in the firms’ default probabilities calculated by the option pricing model and the NPL ratios. Therefore, it is considered that it may be helpful to use the corporate sector default probabilities in credit risk analyses and in the studies to be carried out to monitor the asset quality of the banking sector.
In times of an elevated exchange rate risk, the demand for currency increases due to the hedging motive, which leads to a surge in both the level and the volatility in the currency swap market and the spot market.
Considering the recent fluctuations in portfolio flows, it is critically important to monitor and understand the changing behavior of global portfolio investors towards EMEs.
Muhammed İslami Önal,Mehmet Büyükkara,Zeynep Özge Yetkin
The Turkish banking sector does not experience any problems in implementing Basel III regulations thanks to its high capital adequacy level, strong risk management, effective supervisory and internal control systems, robust equity structure, high level of liquidity, low leverage level and deposit-based funding structure.
Venture capital and angel investment channels are particularly important instruments to boost direct investments of foreign investors in Turkey through international networks. Expansion of these methods is important in terms of their contribution to financial intermediation and their potential in providing high quality external financing.
Mustafa Akay,Doruk Küçüksaraç,Muhammed Hasan Yılmaz
FX derivatives are broadly used to reduce corporates’ exchange rate risk in emerging market economies. However, firms exhibit heterogeneity in terms of the use of derivatives. It will be beneficial to take this fact into account while designing regulations to encourage hedging.
It is anticipated that trade in local currencies will have a significant potential and it is expected that its share in total trade will increase in the coming years
Oğuzhan Çepni,Doruk Küçüksaraç,Muhammed Hasan Yılmaz
The results of our analysis demonstrate that low government debt and adequate foreign exchange reserves positively affect the perception of sovereign risk in financial markets. In this respect, recent policy steps towards effective use of reserves are thought to be beneficial.
Samet Kütük,Yavuz Selim Hacıhasanoğlu,Mahir Binici
In Turkey, we can assert that credit market developments mostly coincide with economic activity. Moreover, we find that the divergence between the duration of business cycles and credit cycles is not as severe as in other countries.
The total debt of resident sectors in Turkey is mostly driven by internal debts and its ratio to GDP has been on the decline since the third quarter of 2015, remaining at low levels compared to the selected countries.
The Data Gaps Initiative has made a significant contribution to countries in collecting and disseminating comparable, consistent and timely statistics. As for Turkey, there have been significant improvements in the statistics produced within the scope of the Initiative with respect to timing and content, and new statistics, such as sectoral accounts and real estate price indices, have started to be compiled and produced that will facilitate monitoring economic activity in Turkey.
Total portfolio inflows to emerging market economies are likely to decelerate in the upcoming period due to the Fed’s policy tightening. However, it appears that country-specific dynamics will be decisive in finding out who will get a larger share from the pie.
Financial conditions, conceptually, summarizes whether financial indicators such as interest rates, exchange rates, asset prices and credit conditions are being restrictive or accommodative on economic activity.
Ahmet Adnan Eken,Mehmet Kasım Tırpan,Neslihan Tuba Kavruk,Başak Erdoğan
A developed and efficient government domestic debt securities (GDDS) market attracts foreign investors to Turkey. Actually, while GDDS held by non-residents has increased over time, the GDDS portfolio of non-residents has become an important item within the financial account of the balance of payments.
