Turkish Banks Ask Regulator to Help Smooth Tensions With Erdogan

(Bloomberg) --

Turkish banks are hitting back at criticism from President Recep Tayyip Erdogan that they’re not supporting the economy by appealing to their regulator to smooth tensions with the government.

Lenders not owned by the state highlighted their efforts to help restructure troubled loans during talks on Tuesday with Mehmet Ali Akben, the head of the banking regulator, according to a copy of the minutes seen by Bloomberg News. The institutions also pointed to a drop in credit demand and more favorable terms offered by state-owned lenders as hindering their ability to compete.

Akben held a teleconference with Huseyin Aydin, who heads the Banks Association of Turkey and is chief executive officer of the country’s largest state-run lender, Ziraat Bankasi AS, as well as senior executives from a dozen lenders, the minutes show. Representatives for the association and regulator declined to comment.

Erdogan and Treasury and Finance Minister Berat Albayrak have repeatedly slammed private banks for failing to support companies even before the coronavirus outbreak paralyzed economic activity and curtailed the movement of people.

The backlash from lenders also comes after the Turkish leader on Monday issued a stern warning to private banks, saying they weren’t “passing the test” in extending loans to troubled businesses.

The government last month unveiled a 100 billion-lira ($14.4 billion) stimulus package, which the central bank supplemented by cutting interest rates, while the regulator eased some rules to enable banks to lend more.

Representatives for the lenders voiced concern with the regulator that they are being singled out and urged that authorities don’t discriminate between state and private financial firms, the minutes of Tuesday’s conference call shows. The constant criticism was also weighing on the morale of bankers, they were cited as saying.

Loan Deals

The lenders also cautioned that pressures over asset quality and capital levels are building and will be more visible in the second half of the year, the document shows.

Akben was cited in the minutes as saying that the priority of lenders should be to support the economy, that private banks should be pricing new loans at reasonable rates, and that they shouldn’t increase interest rates for restructured loans.

Turkish banks, mostly private ones, completed three big-ticket restructurings totaling more than $14 billion in 2018, accounting for about half of the debt reorganizations that have been completed since then.

Loan growth at state banks has risen 7.8% since the beginning of March through April 10, while that of their private peers increased by 4.8%, according to data from the banking watchdog. Since 2017, the pace of lending by state-owned institutions has been three times that of private lenders, the data shows.

©2020 Bloomberg L.P.