Turkey’s Corporate FX Borrowing Risk Limited, Central Bank Says

Corporate FX debt is mainly long-term, cos. short-term FX short position is low, FX borrowing mainly by big cos. that should be able to manage FX risk, central bank says in financial stability report published today.

  • Improvement in household liabilities vs assets continues on macroprudential measures
  • Household borrowing only in liras and on fixed rates, thus repayment ability is preserved
  • Recent tax cuts provided for cash capital increases would encourage equity financing
  • Avg maturity of banks’ foreign borrowing rising after req. reserves policy change
  • Banks have increased core funding resource use after central bank started paying interest on lira req. reserves, which is positive for financial stability
  • Steps to support FX liquidity, core liabilities and long-term borrowing are aimed at boosting resistance to global shocks; additional measures could be taken if deemed necessary
  • Study inside report shows that about half of real increase in home prices is due to improvement in housing quality

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