Turkey Eases Key Banking Ratio in Bid to Normalize Lending

Turkey took another step to slow lending to businesses and consumers after a massive credit boom worsened external imbalances and hit the lira.

The banking regulator, known as BDDK, said Monday that its asset ratio formula, which compels banks to extend more loans, will be reduced by 5 percentage points to 90% for commercial lenders, and to 70% for Islamic lenders.

The decision marks the second reduction in the asset ratio in less than three months as Turkey tries to unwind a stimulus package that had unleashed a credit boom. Record pace of lending by commercial banks resulted in higher imports and a bigger trade gap, contributing to the currency’s 11.7% decline during the quarter, the worst among peers.

Turkey Lowers Key Banking Ratio to Slow Credit as Lira Falls

The lira is trading 1.3% lower at 7.7648 per dollar as of 11:08 a.m. in Istanbul, after hitting an all time low of 7.8279 against the greenback.

©2020 Bloomberg L.P.

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