With robust capital adequacy ratios, Turkish banks to benefit from EU banking sector
With an ever-growing asset size and strong equity structure protecting it against crises, Turkish banks have proved their strong structure and commitment to the Basel requirements, allowing them to be ambitious players in the European market
The European Commission has given the equivalent country status to Turkish banks. This decision will reduce borrowing costs and increase credit limits. The Turkish banking sector, whose compliance with the Basel Standards was reported as "fully compatible" by the Basel Committee in early 2016, has accomplished another important threshold. The European Commission has included the Turkish banking sector in the list of equivalent countries. While this decision will lower the overseas borrowing costs of the banks, it will also allow them to increase their credit limits. The cash inflow from Turkish banks abroad will be accelerated.
Deputy Prime Minister Nurettin Canikli said Turkish banks will now be subject to low-risk weight and stressing that Turkish banks operating in the EU will benefit from the cost of capital, and additional capital costs of foreign banks due to having an affiliate in Turkey will decrease with the said decision.
Noting that Turkish-based banks were regarded as "companies" by the EU banks prior to the decision and they were subject to a relatively high-risk weight, Nurettin Canikli said they will be categorized as "banks" and subject to relatively low risk weight following the decision.
Recalling that investments of the EU banks in Turkey were similarly subject to a stricter application in terms of the application of credit limits, Canikli pointed out that they will also benefit from more advantageous restrictions related to the equivalent countries after the decision.
According to Deputy Prime Minister Canikli, based on the fact that some risk weights in the investments of our banks operating in the EU will be reduced, they will have a cost of capital advantage with the said decision, and the strict implementation of the credit limits of our banks operating in the EU will be also relieved. Canikli also noted that while Turkish banks, which have EU-based main shareholders, cannot benefit from the advantageous practices during the consolidation process, these negativities will be lifted after this decision, and the additional capital costs of foreign banks due to having an affiliate in Turkey will be reduced.
Nurettin Canikli pointed out that Turkish banks will be provided with access and cost advantages to the resources in terms of the funds they can obtain from the EU countries within the framework of the said decision. "Similar to the results of the Regulatory Consistency Assessment Program (RCAP), which was previously held in the Basel Committee on Banking Supervision, this decision confirms that the banking regulation and supervision framework of our country is fully compatible with international standards.
Kapital FX Research Analyst Enver Erkan also said the resources coming from abroad will increase, and financing of the big projects will be facilitated.
With the decision by the European Commission, the regulatory and supervisory framework of the Turkish banking sector has become equivalent to EU legislation, Deputy Prime Minister Nurettin Canikli said in a written statement.
According to the report released by Investment Support and Promotion Agency of Turkey, Since July 2012, Turkey has begun fully implementing Basel II standard of credit risk assessment. The Turkish banking sector has capital adequacy ratios (CAR) above the regulator limits of BRSA, which was 12 percent. Moreover, Turkey's CAR exceeds that of Basel II, which was 8 percent and Basel III, which will gradually increase each year and will be set at a total capital ratio of 10.5 percent by Jan. 2019. Despite the global economic crisis and the Eurozone crisis, the high capital adequacy ratio of Turkish banks allowed them to achieve strong financial statements. Hence, Turkish banks were only slightly affected by both crises. Moreover, Turkish banks are already prepared to meet the new capital requirements of Basel III.
The report reveals that Turkey enjoys strong asset growth with a stunning CAGR 19 percent, with a remarkable increase in the total assets to GDP ratio from 63 percent in 2005 to 121 percent in 2015. Despite that, the Turkish banking sector is still unsaturated when compared with the Euro Area. As of the end of 2015, 32 percent of the banking assets were owned by public banks, 38 percent by private banks, and 30 percent by foreign banks. The share of foreign banks in total assets increased from just 4 percent in 2004 to 30 percent in 2015, while the share of state owned banks decreased to 32 percent from 38 percent. As of June 2016, there are 53 banks in Turkey. There are a total of 34 savings banks, 13 development and investment banks and 6 participation banks.
Deputy Prime Minister Nurettin Canikli said Turkish banks will now be subject to low-risk weight and stressing that Turkish banks operating in the EU will benefit from the cost of capital, and additional capital costs of foreign banks due to having an affiliate in Turkey will decrease with the said decision.
Noting that Turkish-based banks were regarded as "companies" by the EU banks prior to the decision and they were subject to a relatively high-risk weight, Nurettin Canikli said they will be categorized as "banks" and subject to relatively low risk weight following the decision.
Recalling that investments of the EU banks in Turkey were similarly subject to a stricter application in terms of the application of credit limits, Canikli pointed out that they will also benefit from more advantageous restrictions related to the equivalent countries after the decision.
According to Deputy Prime Minister Canikli, based on the fact that some risk weights in the investments of our banks operating in the EU will be reduced, they will have a cost of capital advantage with the said decision, and the strict implementation of the credit limits of our banks operating in the EU will be also relieved. Canikli also noted that while Turkish banks, which have EU-based main shareholders, cannot benefit from the advantageous practices during the consolidation process, these negativities will be lifted after this decision, and the additional capital costs of foreign banks due to having an affiliate in Turkey will be reduced.
Nurettin Canikli pointed out that Turkish banks will be provided with access and cost advantages to the resources in terms of the funds they can obtain from the EU countries within the framework of the said decision. "Similar to the results of the Regulatory Consistency Assessment Program (RCAP), which was previously held in the Basel Committee on Banking Supervision, this decision confirms that the banking regulation and supervision framework of our country is fully compatible with international standards.
Kapital FX Research Analyst Enver Erkan also said the resources coming from abroad will increase, and financing of the big projects will be facilitated.
With the decision by the European Commission, the regulatory and supervisory framework of the Turkish banking sector has become equivalent to EU legislation, Deputy Prime Minister Nurettin Canikli said in a written statement.
According to the report released by Investment Support and Promotion Agency of Turkey, Since July 2012, Turkey has begun fully implementing Basel II standard of credit risk assessment. The Turkish banking sector has capital adequacy ratios (CAR) above the regulator limits of BRSA, which was 12 percent. Moreover, Turkey's CAR exceeds that of Basel II, which was 8 percent and Basel III, which will gradually increase each year and will be set at a total capital ratio of 10.5 percent by Jan. 2019. Despite the global economic crisis and the Eurozone crisis, the high capital adequacy ratio of Turkish banks allowed them to achieve strong financial statements. Hence, Turkish banks were only slightly affected by both crises. Moreover, Turkish banks are already prepared to meet the new capital requirements of Basel III.
The report reveals that Turkey enjoys strong asset growth with a stunning CAGR 19 percent, with a remarkable increase in the total assets to GDP ratio from 63 percent in 2005 to 121 percent in 2015. Despite that, the Turkish banking sector is still unsaturated when compared with the Euro Area. As of the end of 2015, 32 percent of the banking assets were owned by public banks, 38 percent by private banks, and 30 percent by foreign banks. The share of foreign banks in total assets increased from just 4 percent in 2004 to 30 percent in 2015, while the share of state owned banks decreased to 32 percent from 38 percent. As of June 2016, there are 53 banks in Turkey. There are a total of 34 savings banks, 13 development and investment banks and 6 participation banks.
Last Update: December 23, 2016 20:17