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Turkey’s Tweak of Basel Capital Measures Helps Banks, BGC Says

Turkey’s fine-tuning of the Basel II capital rules limits their impact on banks, protecting Turkiye Is Bankasi AS, Turkiye Vakiflar Bankasi TAO and Yapi & Kredi Bankasi AS from falling below required capital requirements, brokerage BGC Partners said.

The banking regulator’s discretionary implementation of the rules reduces the negative impact of Basel II on banks’ capital adequacy ratios by an average of 100 basis points, or 1 percentage point, BGC bank anaylst Muge Dagistan said in an e-mailed report today.

“The amendments came as a relief especially to Isbank, Vakifbank and Yapi Kredi Bank as otherwise their CARs would have faced the risk of falling below the 12% regulatory threshold in the next 2 years,” Dagistan said.

The banking regulator in Ankara will allow banks to give a zero percent risk weighting to foreign exchange reserves held at the central bank, instead of the Basel II requirement of 100%, according to the regulations published in the Official Gazette today.

The measures will reduce the average capital adequacy ratio of banks by 0.2 percentage point after they take effect on July 1, an official from the regulator who declined to identified in line with policy said by telephone yesterday.

Basel II is designed to establish a more comprehensive and flexible framework for calculating banks’ risk exposures. Turkey is among countries including China, Indonesia, the U.S. and Russia yet to fully implement the capital rules, which were due to be adopted by the end of 2006, the Basel Committee said in a report in April.

Yapi Kredi, the Turkish bank co-owned by Istanbul-based Koc Holding AS and Milan-based UniCredit SpA, will be the worst-hit large bank from the measures “due to its high exposure to eurobonds, whose risk weighting is increased to 100 percent,” Dagistan said.

Yapi Kredi said yesterday it was considering selling its stakes in insurance unit Yapi Kredi Sigorta AS and pensions unit Yapi Kredi Emeklilik AS, according to a statement to the exchange. The sale could improve Yapi Kredi’s capital adequacy ratio by 2 percentage points, Dagistan said.

Turkish banks’ average capital adequacy ratio was 16.4 percent at the end of April, according to data on the regulator’s website.

Islamic lender Albaraka Turk Katilim Bankasi AS needs an “imminent rights issue” to abide by the new reguations as its current ratio of 12.3 percent puts it in danger of falling below the threshhold, limiting its ability to extend loans, Dagistan said.

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