Last week, the CEO of one of the best know Turkish Banks,
finally went out publicly to declare that the year 2014 will
probably be the toughest one of the last ten years for the Turkish
Banking sector. Such an expectation is no surprise for any emerging
economy since the uncertainties and concerns over a possible Fed
decision to cut monetary expansion continues. But the Turkish
banking sector has additional concerns other than such an
apprehension over Fed`s decision that is almost shared by every
other economy, emerging and developed alike.
During the last decade Turkey has witnessed almost an economic
miracle. The GDP growth in unprecedented levels, macro-economic
reforms, a booming purchasing power parity, dramatic reduction of
interest rates alongside the inflation rates coupled with reforms
that regulated the banking sector along sound and stable lines, all
combined to create a very conducive environment for the banking
sector in Turkey to record high growth rates. However some
structural problems still continue to haunt the Turkish economy.
The current account deficit which had exceeded USD$ 60 billion in
the last 12 months continues to pose a serious problem for the
Turkish economy. What is more alarming is that a sizable portion of
this deficit is generated by Turkey's energy needs which are
not going to wither away in short term. Add to this the
historically low rate of national savings that stand around only at
12% of the GDP, and the volatile exchange rates, one can better
understand the danger that the current account deficit poses to the
Limitations for the Credit Card Installments
In line with the concerns for high current account deficit and
low level of savings, the authorities have recently taken action to
cut the spending rates. A recent regulation has been adopted to
limit the number of installments for the credit cards. For the food
and fuel purchases there shall be no installments. The same
regulation which will be in effect on February 2014 restricts the
number of installments for consumer electronics and for the
subscriptions for telecommunication and internet services to 9
months which is currently going up until 24 months. This is a
drastic reduction of spending capability on the part of the
The same regulation deals with the down payment rates as well.
For automobile purchases, the down payment rates have been
redefined. For the cars which's price does not exceed 50.000
TL, the new regulation requires 30% of the total price to be paid
by the buyer as the down payment and only the rest of the amount
can be supplied by the banks as a credit. For the cars which's
price exceeds 50.000 TL the down payment rate goes up to 50% of the
total price which means that the buyer can only approach the banks
for a credit for the remaining half of the sum. Moreover in both
cases payback period is restricted; the credit has to be paid back
in 48 months.
Implications for the Banking Sector
Obviously such a regulation that aimed at cutting the consumer
spending is not very good news for the Banking sector. Short
installment periods and the higher levels of down payments might
lead to a shrinkage in credit market. But a possible upside for the
banking sector might be the emergence of a more solid consumer
basis with a higher capacity to pay the credit back. Especially the
more stringent the rules for credit paybacks the more choosy the
banks have to be before they land the credit to the consumers. And
such banking prudence which have already been developing in Turkey
after the banking regulations of 2002, might serve to prevent
banking related economic crisis that results from bad landing
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Under Regulation (EU) No. 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories ("EMIR")...
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