The head of Türkiye’s Banks Association on Tuesday expressed expectations for extra restrictive measures on explosive bank cards, which grew thrice the overall loans in 2023, to rein in inflation.
Credit playing cards grew by 159% as of final yr, based on the banks affiliation knowledge, in comparison with 54% development in complete loans.
“It is evident that there is a need for regulation in this area. I believe there will be a regulation here to manage the credit cards’ inflation effect,” Alpaslan Çakar instructed a gathering with journalists.
“I think action will be taken this year.”
The chief government of massive state financial institution Ziraat, Çakar expects the central financial institution to lift rates of interest one final time this week and start an easing cycle within the final quarter of this yr.
He additionally mentioned he anticipated authorities to take away this yr a raft of economic laws that have been adopted within the wake of a late-2021 deep Turkish lira depreciation.
The feedback from Çakar present a street map on financial and macroprudential coverage from a senior monetary sector official as Türkiye continues alongside a extra standard policymaking path embraced after President Recep Tayyip Erdoğan appointed a brand new financial administration after successful reelection in May.
The workforce reversed a yearslong easing coverage and embraced a pointy tightening sought to arrest inflation, cut back commerce deficits, increase overseas funding, rebuild overseas trade reserves and stabilize the lira.
The Central Bank of the Republic of Türkiye (CBRT) has lifted its key price by 3,400 foundation factors since June, together with a hike of 250 foundation factors to 42.5% final month.
Credit card measures
In addition to price hikes, the federal government elevated the chance weights on particular person loans to curb home demand and eliminated installments for abroad journey.
Measures associated to bank cards may contain limits on installments and credit score restrict controls, Çakar mentioned. He famous he doesn’t anticipate an adjustment in rates of interest, which the central financial institution determines based mostly on its formulation.
“However, I expect a regulation within the scope of other parameters,” he added.
Çakar mentioned they anticipate the overall credit score development within the banking sector to be round 40% this yr. He added that they anticipate a slight improve in non-performing loans (NPL) as a result of financial tightening, however mentioned it could be manageable.
The Turkish banks’ borrowing from overseas stands at $116 billion (TL 3.51 trillion), with $78 billion in loans, $19 billion in borrowings from cash markets and $19 billion from securities issuance, he famous.
Çakar talked about that the sector confronted occasional difficulties in borrowing from overseas in earlier years. However, he emphasised that there are at the moment no issues relating to borrowing and demand.
“Maturities are getting longer, and costs will gradually decrease. Money can be found, and there is demand now. Costs will also decrease with the decline in CDS (credit default swap),” he added.
One last price hike
Çakar went on to say that price hikes are coming to an finish everywhere in the world.
“I think Türkiye will follow the main central banks’ rate-cut steps and expect a rate-cut cycle to start in the last quarter,” he mentioned.
According to surveys, the CBRT is predicted to lift its key coverage price by one other 250 foundation factors to 45% at a coverage assembly on Thursday, marking the top of its aggressive tightening cycle.
Çakar mentioned he expects inflation to proceed rising by May, earlier than declining to round 40%-45% by year-end, greater than the central financial institution’s expectation of about 36%.
Erkan was cited as telling traders this month that the financial institution would take any motion wanted because it sought to decrease inflation, which neared 65% final month.
“The crucial aspect is to lower inflation before it becomes sticky and permanent. Managing sticky inflation is of vital importance, and close attention must be paid to it,” mentioned Çakar.
“In this context, certain mechanisms need to be operated more actively to protect the market, safeguard the real sector and promote growth again.”
Normalization in markets
Çakar additionally expects the central financial institution will take away a raft of macroprudential measures earlier than 2025, reflecting what he referred to as a normalization that has began in monetary markets.
“Life in the market is gradually returning to normal. The dynamics of price, demand, customer and bank relationships are beginning to take shape. Moreover, the credit mechanism has already found its own course,” he famous.
He additionally cited expectations for an finish to a government-backed scheme safeguarding Turkish lira deposits towards overseas trade depreciation.
The authorities has begun rolling again the so-called KKM scheme and introduced measures after the May elections to dissuade corporations and people from renewing the KKM accounts, which reached a document of over TL 3.4 trillion in mid-August.
The determine has been falling since then and reached as little as TL 2.53 trillion as of the week ending Jan. 12, based on the Banking Regulation and Supervision Agency (BDDK) knowledge.
“By 2025, the KKM will likely cease to be on the agenda,” mentioned Çakar.
Reserve necessities have reached 15%-16% of banks’ steadiness sheets, he mentioned, posing “a serious cost for banks.” Lenders have requested the central financial institution for “remuneration” on the required reserves, he added, with out elaborating on prospects.
Source: www.dailysabah.com
