Turkey's banking watchdog backed down on a directive issued in September instructing banks to classify $8.1bn of loans as non-performing, Bloomberg reported.
Banks will no longer need to book loans of solvent firms as bad debt, Bloomberg said, citing people familiar with the matter. The Banking Regulation and Supervision Agency (BDDK) declined to comment.
It is now up to banks to decide which debt should be classified as non-performing loans (NPLs), the sources said, asking to remain anonymous because the decision has not been made public. The firms will not need to book the loans of businesses that have restructured debt or bolstered cash flows as NPLs, they said.
The measures are the latest move by the bank to adjust banks' reserve requirements to boost Turkey's economy after a recession triggered by last year's currency crisis and a surge in inflation and interest rates.
The watchdog in September ordered banks to reclassify 46bn liras ($8.1bn) of debt as non-performing by the end of the year and set aside enough provisions to cover them. It is now backing down after banks complained that healthy businesses were included in the list, the people said.
Foreign investors had welcomed the September measure as a signal that Turkey was finally dealing with troubles in the banking industry following last year's currency crisis.