Senior banker: Economy needs lower interest rates

DAILY SABAH WITH AA
ISTANBUL
Published 18.07.2019 00:08

If the Central Bank of the Republic of Turkey (CBRT) will drop interest rates in line with the market expectations, the Turkish economy will enter the balancing period, said the general manager of state-run participation lender Türkiye Emlak Katılım Bankası (EmlakBank).

Speaking at Anadolu Agency's Finance Desk yesterday, Deniz Aksu stressed that the biggest problem for the banking sector was pricing, the market can currently do pricing but it could do pricing easily if interest rates would drop.

"I expect that [the interest rate] would drop to a single-digit number from the double-digit level," he underlined.

The Central Bank Monetary Policy Committee (MPC) will meet on July 25, with newly appointed governor of the Central Bank Murat Uysal in the chair, to determine interest rates.

Turkey's main interest rate stands at 24 percent after the bank made an aggressive rate hike of 625 basis points last September following speculative fluctuations in exchange rates that erupted last August, in the aftermath of which the Turkish lira lost around 30 percent of its value against the U.S. dollar.

With a decline in inflation and a stronger Turkish lira recently, experts expect the central bank could ease monetary policy at its meeting later this month.

The inflation rate fell to 15.72 percent in June from 18.71 percent in May, according to Turkish Statistical Institute (TurkStat), the lowest rate of inflation since last June when it was 15.39 percent.

"We saw 4.6 percent interest rates before, Turkey does not deserve 24 percent interest rates, there is no such interest rate in the world, there is the negative interest rate in Europe, there is no reason for a 24 percent interest rate," he added.

Speaking about Turkey's banking sector, Aksu said it would continue to be a locomotive sector for the economy with its strong financial ratios.

"Turkey's banking sector has 17 percent capital adequacy ratio, which is more than world standards," he stressed.

Aksu also said as of the end of the first half of 2019, EmlakBank's assets reached TL 4.6 billion with only one branch.

The bank targets to reach the asset size of TL 8 billion, 15 branches and 500 employees as of the end of this year, he underlined. Aksu also said the bank also aims to open a branch abroad, especially in Europe.

He said EmlakBank provided around TL 1.7 billion fund for the market, adding the bank will not only focus on building houses but also building factories.

"We want to find low-cost and long-term thematic funds from foreign countries for financing investments in our target sectors," Aksu added.

In the aftermath of the foundation of the Turkish Republic, the Emlak and Eytam Bank was established in 1926, the third bank after İş Bank and the Sanayi ve Maadin Bank (Industry and Mining Bank). The aim of the bank was to support construction projects in order to facilitate the social and economic development in the nascent republic. In 1946, the bank's name changed to EmlakBank and lost its banking license in 2001. Its 405 branches were transferred to state lender Ziraat Bank. The bank was granted a banking license by the Banking Regulation and Supervision Agency (BDDK) in February. It is now carrying out its operations as a participation bank.

The bank will support the real estate sector by way of providing packages for the manufacture of imported goods used in the sector, while it is also expected to offer support for industrialists and tourism entrepreneurs investing in Turkey. The EmlakBank will be Turkey's sixth participation bank.

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