High capitalisation ratio seen as strength for Turkish banks

Turkey’s minister of Finance Mehmet Şimşek says that the country’s banks are well placed to survive the current financial crisis, because of lessons learned in recent years, including the need for high levels of capitalisation.

Speaking at the East Capital Summit in Istanbul, Şimşek said Turkey was not immune to the dangers to global growth from the debt crises striking the US and Europe.

But he also stressed that the actions taken by his country in response to previous crises has left it relatively better prepared to deal with the current one. This is particularly the case in its response to the problems it faced in the banking sector over the past decade.

“We liquidated some 20 banks, essentially all the weak banks were transferred to an agency that resolved it. It was a hefty deal for tax payers, we ultimately spent a quarter of our GDP on banking reconstruction.”

“When the current crisis began banks had a capital to asset ratio of 18% and it’s still at that level.”

Şimşek stressed what the country sees as its strengths, including geographical location, and convergence with a more developed EU.

“Turkey should be able to sustain 5 to 6 percent yearly growth for a decade or two, not least thanks to our young population.”


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