Turkish regulator looks to cancel $1.9bn worth of bank loans

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Turkish regulator looks to cancel $1.9bn worth of bank loans

Ankara is seeking to have Turkish banks write off loans to key energy and infrastructure projects as part of a wider strategy to clear lenders' books and boost available credit in Turkey's lacklustre economy.

According to Bloomberg, the banking regulator, known in Turkey by its initials BDDK, is looking to have the credit approved to date for at least three new gas-fired power plants to be classified as non-performing loans.

Turkish banks that have lent to these infrastructure projects include Garanti Bank, Is Bank, Akbank, Denizbank and Yapi Kredi. The European Bank for Reconstruction and Development (EBRD) also contributed funding which in total amounts to $1.9bn.

TEB Investment analyst Ovunc Gursoy told Bloomberg the move is constructive: "We believe that the government is working on a broader plan to bring a resolution to energy sector NPLs, which is likely to be revealed before the year end," he said.

Estimates put the debt that Turkish companies have racked up since 2003 at $60bn, mostly to fund investments in energy supply and distribution.

The persistently weak lira is making it difficult for the country to meet these dollar-denominated loan repayments. The Turkish lira lost 28% of its value against the US dollar in 2018, before steadying somewhat this year. One dollar is currently worth TL 5.73.

The Borsa Istanbul Banks Sector Index on the Turkish stock exchange fell by 1.4% in Friday trading.

 

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Christopher Copper-Ind

Christopher Copper-Ind is editor-in-chief of International Investment. Before this, he was editorial director of The Business Year, from 2014 to 2017.