Turkish non-performing loans virtually unchanged since September

Turkish banks’ non-performing loans have remained almost flat since the start of September, even during a second wave of the COVID-19 pandemic and after the lira sank to successive record lows against the dollar, according to official figures.

The bad loans totalled 151.588 billion liras ($21.1 billion) in the week ending Jan. 22, the Banking Regulation and Supervision Agency (BDDK) said in a report. The loans stood at 150.848 billion liras at the start of September and varied between 150.189 billion liras and 151.842 billion liras on a weekly basis since, or by a maximum of 0.7 percent, the data showed.

The Turkish lira fell sharply last year, making it more expensive for companies to repay foreign currency-denominated debt and pressuring their balance sheets. The lira hit a record low of 8.58 per dollar in early November, taking losses for the year to about 30 percent. It then rallied after the central bank hiked its benchmark rate to 17 percent from 10.25 percent, trading at around 7.2 per dollar on Monday.

The International Monetary Fund, the World Bank and other international financial institutions have warned Turkey about pressure on banks’ finances from non-performing and restructured loans, recommending that the authorities set up a ‘bad bank’ to deal with them.

Total loans in Turkey stood at 3.55 trillion liras on Jan. 22, meaning non-performing loans constituted about 4.3 percent of total lending, according to official data. The loans stood at 3.49 trillion liras at the start of September.

The BDDK is a state-run institution. The institution’s autonomy from politics was strengthened under an IMF rescue programme agreed at the start of this century. Last week, the fund called on the Turkish authorities to ensure the autonomy of such bodies.

Turkish bank regularly sell off their non-performing loans to debt collection agencies at a discount.

Turkey non-performing loans
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