Moody's report on Turkish banks was 'intentional'

By Muhammed Ali Gurtas

ANKARA

There is no sign of deterioration in the Turkish banking sector's nonperforming loans or assets quality which could disturb the system, the head of the Turkish Banking Regulation and Supervision Agency said Monday.

Mehmet Ali Akben told Anadolu Agency the regulatory and supervisory framework of the Turkish banking sector was equivalent to EU legislation.

"The Turkish banking sector closed 2016 very well in terms of profitability. There is no significant deterioration in neither the banks' assets quality nor their nonperforming loans," he said.

Akben's comments came after international credit rating agency Moody’s on Monday forecast that Turkish banking sector profits would be significantly hit in 2017 by rising non-performing loans. Moody's also said asset quality was likely to face challenges created by the current slowdown in the country’s economy.

"We expect asset quality trends to worsen in this year, driven by the combination of high inflation, lira depreciation and the general worsening of the investment climate because of security issues and geopolitical tensions," Moody’s said in a report.

However, Akben was critical of the report: "Turkey has a solid risk management framework in the banking sector. We cannot talk about a fall in the banks' capital adequacy ratio. In this sense, we see Moody's recent release as intentional."

Speaking on the fluctuations in foreign exchange rates, Akben said: "There is not a very large volume behind these movements. But some centers abroad are speculating over foreign exchange."

Turkey’s banking watchdog head also said capital controls were out of the question, echoing earlier statements made by Deputy Prime Ministers Mehmet Simsek and Nurettin Canikli.

A country can use capital controls to order its banks to impose strict limits on daily withdrawals and foreign transfers of cash.