Turkish banking regulations meant to keep the cost of credit low for small to medium-sized businesses (SMBs) and exporters are reportedly causing banks to pull back on corporate lending.
Because the credit and collateral regulations aim to provide cheaper credit to businesses that are smaller — and therefore in some cases riskier — they have caused both the costs and risks to Turkish banks to rise, so some of these financial institutions are dialing back corporate lending, according to a Monday (Sept. 12) report by Reuters that cited unnamed sources in banking and the private sector.
“These are very difficult times to manage for a bank,” one source said, per the report. “Each bank is trying to manage its own balance sheet against the extra liabilities that may come after the government’s regulations and this frightens the banks.”
An unnamed official at the country’s central bank said that since the beginning of the year, the share of loans going to SMBs has risen from 5% at the beginning of the year to 25%, according to the report.
The banking regulations meant to bolster “growth, employment, investment and exports” contributed to a spike in inflation and a crisis in the country’s currency, the Turkish lira, since late last year and may be hurting the ruling party’s chances in elections that are to be held next year, per the report.
As far back as January, residents of Turkey were flocking to speculative cryptocurrencies in a search for financial stability, even as President Recep Tayyip Erdogan was planning to crack down on the digital currency as the Turkish lira was in turmoil, The Financial Times reported at the time.
Read more: Turkish Authorities Alarmed by Rise of Cryptocurrencies
An unnamed source said in that report, “When there are so many economic problems [in our country], people are looking for other ways to make money.”
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More