Turkish banks ATMs/Bloomberg
Under the programme, the government would also be prodding lenders to boost capital to restore buffers and create room for new credit in their balance sheets.
Sunday 08, September 2019
Turkey wants its banks to write off loans to some energy projects as part of a larger plan to clear lenders’ books, an effort aimed at boosting credit in the nation’s ailing economy, reported Bloomberg.
Banking regulator (BDDK) wants credit extended to at least three gas-fired power plants to be classified as non-performing loans.
The three gas-fired power plants are ACWA’s $1 billion plant in Kirikkale, Gama Enerji’s $900 million project near Ankara and a $1 billion facility run by Ansaldo Energia and its partners in Gebze.
Turkiye Garanti Bankasi, Turkiye Is Bankasi together with Akbank, European Bank for Reconstruction and Development, as well as Denizbank and Yapi Kredi Bankasi, are among the banks that lent to those projects. The total original loans on these projects were nearly $1.9 billion.
The push for those three particular projects is part of a broader blueprint that policymakers are working on. The Turkish government is unlikely to put up with historically low levels of loan growth for much longer as President Recep Tayyip Erdogan pushes for measures to get the economy expanding at a much faster pace.
Many banks privately told policymakers that they weren’t keen on being forced to reclassify massive amounts of debt as NPLs so quickly.
According to a Boston Consulting Group report, Turkish companies have borrowed around $60 billion since 2003 to finance investments into new power generation and distribution. With the lira sliding faster than most producers can raise electricity prices, some utilities aren’t earning enough to repay foreign-currency loans, posing a great risk to banks.
In July, Treasury and Finance Minister Berat Albayrak said that the government will not cover any losses incurred by banks, which have reorganised nearly half of TRL 400 billion ($70 billion) of troubled loans.