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Turkish Banks’ Capital Ratios May Fall on Basel, Fitch Says

Turkish banks’ capital ratios may drop by an average of about 1 percent because of the country’s switch to Basel II today, Fitch Ratings said.

Turkish banks are generally well capitalized, which is positive for the lenders’ ratings, Fitch said in a statement today. Tight regulatory oversight will help prevent a rapid buildup of industry leverage, it said.

Turkey’s banking industry reported a total capital adequacy ratio of 16.2 percent at the end of May 2012. Turkiye Is Bankasi AS, the country’s largest bank by assets, had a capital ratio of 13.9 percent at the end of March, down from 14.1 percent in December, statements filed to the stock exchange on May 11 showed. Turkey’s economy grew 8.5 percent last year as a surge in loan growth of as much as 40 percent annually allowed consumers to buy more items such as cars and home appliances.

“Retail portfolios are large in Turkey,” Fitch said. “High capital charges will dampen a surge in consumer borrowing and this will be credit positive for the banks.”

The Banking Regulation and Supervision Agency was “tough in its application‘‘ of Basel II, Fitch said. Under its rules, foreign-currency-denominated Turkish sovereign bonds attract a 100 percent risk weight, compared with a previous risk weight of zero percent, it said.

‘‘Turkish banks are large investors in sovereign bonds, so capital ratios will suffer,’’ Fitch said.

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