ANKARA
Turkish banks have too much short-term foreign debt, credit rating agency Fitch said in a report released on Thursday.
Sharp changes in investor sentiment pose a risk for Turkish banks, as they are the largest borrowers financing Turkey’s significant current account deficit, Fitch said.
Although a reduction of Turkey’s external debt is mainly driven by the slacker credit growth and savings on oil imports, Fitch said that a decline in growth of banks’ external liabilities in 2014 is also attributed to the strong dollar which cut the cost of debt in euro and Turkish Lira.
“Our base case expectation, based on an established track record of high rollover rates, is that Turkish banks will retain good access to foreign credit markets. “ Fitch said.
“We also believe their foreign-currency liquidity should be sufficient to deal with a short-lived market closure. But the banks' vulnerability to a more prolonged lack of access remains significant.”
Fitch pointed out that the recent substitution of short-term debt structures with long-term facilities is certainly positive for Turkish banks, but short-term debt stock constitutes most of their external liabilities and the foreign-currency liquidity positions of Turkish banks has not significantly changed since 2013.
