Turkey Steps Up Support for Lenders After Failed Coup

Updated on
  • Lowers amount of cash that lenders must keep with regulator
  • Move expected to boost liquidity in financial markets

Turkish policy makers are stepping up their support for commercial lenders to help them cope with any adverse impact on bank lending from last month’s failed military coup.

The central bank cut the amount of cash it forces commercial banks to keep locked up with the regulator, reducing the so-called lira reserve requirement ratio by half a percentage point. It also allowed banks to use a smaller amount of foreign-exchange or gold as required reserves for lira liabilities, according to a statement on its website.

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Following the failed July 15 attempt by sections of the military to overthrow the government, the central bank said it would provide unlimited liquidity to lenders and take any necessary measures to support financial stability.

The bank said Tuesday’s action will add around 1.1 billion liras ($369 million) and $600 million to liquidity, assuming lenders utilize the reserve option system at the same rate.

The decision will mostly have a positive effect on sentiment, “if we assume this possibly being an indicator of other similar measures to come,” Cagdas Dogan, a banking analyst at BGC Partners in Istanbul, said by e-mail. The move could lead to a “tiny” reduction in lending rates, Dogan said.

An index that tracks bank shares on the main Borsa Istanbul stock exchange extended gains following the statement, ending 1.12 percent up at the market’s close, compared with a 0.96 percent rise in the benchmark measure.

The banking regulator aims to finalize a separate plan within 10 days to extend the repayment period for consumer loans and restructure credit card debt, state-run Anadolu news agency reported Tuesday, citing its chief Mehmet Ali Akben.