Turkish banking sector to stay resilient: Central Bank

By Dilara Zengin

ANKARA

Turkish banking sector will remain resilient against global risks since it has a strong capital base, stable asset quality and adequate level of liquid assets, according to the Central Bank Thursday.

"Despite the positive outlook in the global economy and financial markets, risks related to the upcoming period remain intact.

“The developments in the monetary policies of advanced countries, global geopolitical risks and political developments in the Euro Area are among the possible factors of fragility for the financial system," the bank said in its November financial stability report.

It noted that the recovery in the global economy continued since its previous Financial Stability Report released in May.

"In Turkey, thanks to the macro prudential policies that have been implemented in tandem with public financial incentives and support, credit growth has exhibited a stronger outlook than in previous years and economic activity has accelerated," it explained.

The bank's report said strong outlook in economic activity continued in the third quarter.

Turkey’s economy grew 5.2 percent in the first quarter of this year and 5.1 percent in the second quarter, compared with the same periods in 2016, according to the Turkish Statistical Institute (TurkStat).

Profitability of firms increased, liquidity indicators improved and balance sheets remained robust on the back of a strong growth performance of second quarter of 2017, the bank said.

"The banking sector preserves its strong liquidity position against possible shocks," it said.

The report showed the banks' liquid assets in gold and foreign exchange that they held in the Central Bank under the framework of the Reserve Options Mechanism facility had recently increased.

"Despite the recent increase in credit growth, strong growth in deposits offers banks an additional protection for their liquidity positions and supports credit supply," it said.

The bank noted that asset quality of the banking sector is strong.

"With the revitalization of the credit channel and the pick-up in economic activity, the decreasing amount of additions to Non-Performing Loans (NPLs) and write-offs as well as the rising amount of receiving compared to the previous report period contributed to the preservation of asset quality."

It added the banking sector sustains its strong capital structure.

Profitability developments also support the equity and capital adequacy levels in the banking sector, it also said.