Page 16 - TURKRptJul20

place).
We must unfortunately note that there’s no Doing Banking Business sub-category, a great pity because as a result of nonstop regulatory forbearance, the capital adequacy ratios and financial statements of the lenders in Turkey are far from reliable.
Seker Invest contends that the latest amended asset ratio rules should encourage the banks to scale up their lending to real sector companies, extend the overall maturity of their lending books and add more foreign currency lending through their collected FX deposits.
The introduction of an adjustment period for the small-scale banks with total TRY and FX deposits of less than TRY25bn (excluding bank deposits) as of Q1 should bring a competitive edge to these banks until end-2020, Seker adds.
Lastly, banks might be less willing to issue short-term domestic bills as they are now included in the calculation of the denominator of the asset ratio.
The initial ratio was:
Assets Ratio (AR) = (Loans + (Securities x 0.75) + (Central Bank Swaps x 0.5)) / (Turkish lira (TRY) deposits + (FX Deposits x 1.25))
The new formula is:
Assets Ratio (AR) = (Loans (*) + (Securities x 0.75) + (Central Bank Swaps x 0.5)) / (TRY deposits + (FX Deposits x 1.75 (**))).
(*) There will be 1.1 coefficient for the calculation of SME, project finance and export loans while loans with less than 3 months maturity will be excluded from the calculation (the lenders had opened short-term accommodation loans to big conglomerates to increase the numerator of the first ratio, and they also ramped up government bond purchases).
Repo transactions with clients and securities issued on the TRY side with less than 6 months maturity will be added to TRY deposits, while repo transactions with clients on the FX side will be added to FX deposits (the lenders had started to offer bills to their deposit clients to reduce the denominator of the initial ratio; Erdogan had also increased the tax on bills to 15% from 10%).
(**) For calculation of the denominator part of AR, there will be a 1.75 coefficient for the part of the FX deposits exceeding the total amount of the FX loans, while the coefficient will be 1.0 for the remaining part of the FX deposits.
Among private deposit banks, Akbank (AKBNK), Yapi Kredi Bank (YKBNK) and Garanti Bank (GARAN) are in relatively better positions as the shares of
16​ TURKEY Country Report​ July 2020 ​ ​www.intellinews.com