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Free AccessREPEAT: MNI: Euro Bank Regulators Not Yet Talking Turkey
Repeats Story Initially Transmitted at 14:23 GMT Aug 17/10:23 EST Aug 17
--
By Luke Heighton
LONDON (MNI) - Banks, central banks and regulators are united in their
response to this week's crisis for the Turkish lira, and for the most part
remain tight-lipped in their public responses, while signalling that any
potential losses are small and containable.
BaFin, the German bank regulator, said it had discussed the situation and
was "assessing the risks and issues on an ongoing basis".
The organisation was "not concerned about the potential overall impact on
the German banking system", but that "it is impossible to predict how the
current situation will develop," a spokesman told MNI.
As the crisis unfolded, the European Central Bank was said to be
"concerned" at the exposure of some of the euro zone's largest lenders. The Bank
of International Settlements (BIS), the European Banking Authority (EBA) and the
Central Bank of Turkey remain predictably tight-lipped.
--NORTHERN EXPOSURE
Figures for 2017 released by the Central Bank of Turkey showed that German
banks provided 11% of loans from abroad to Turkey's private sector, second only
to the UK.
Today, Germany ranks only sixth on the list of Turkey's international
lenders, behind Spain ($80billion), France ($30billion), Italy and the US (both
$18billion) and the UK ($16billion), with loans worth $12billion outstanding at
the end of March.
The EBA said it was monitoring developments, and "liaising closely" with
the ECB's Single Supervisory Mechanism, while the central banks of Turkey, Spain
and the Netherlands declined to comment.
Spain's BBVA, Italy's UniCredit, France's BNP Paribas and the UK's HSBC are
the most exposed to Turkey, both directly and via their subsidiaries, along with
ING of the Netherlands -- a notable absence from the BIS data.
BBVA controls 49.9 of Garanti bank, which has a book value of EUR4.4billion
and controlled assets of around $84billion as of June 30, accounting for some
13% BBVA earnings, according to analysts at Deutsche Bank.
UniCredit owns around 40% of Yapi Credit, accounting for approximately 2%
of group revenues. Turkey accounts for some 2.5% of BNP's pre-tax profit,
Deutsche Bank estimates, thanks to its 72% stake in Economy Bank of Turkey.
A worst case scenario would see BBVA lose around 12% of its group equity,
while UniCredit and ING would lose 4%, and BNP around 1.7%, Deutsche Bank said,
while HSBC's book value could fall by 0.3% -- equivalent to around
USD400million.
--SUPRANATIONAL LENDERS
Private businesses owe an additional EUR7.4billion (including undisbursed
commitments) to the European Bank for Reconstruction and Development (EBRD),
which currently funds 237 mostly private portfolio projects in the country,
with, 30% of funds going to financial institutions, 30% to industry, commerce
and agribusiness, 23% to infrastructure projects, and the remaining 17% to the
energy sector.
Turkey is also indebted to the the European Investment Bank (EIB) and the
European Investment Fund (EIF), which in 2010 awarded loans and guarantees worth
EUR250million plus EUR30million in guarantees to the sector to help small and
medium-sized enterprises and micro-enterprises in Turkey's lesser developed
provinces.
Whether the currency crisis will carry through in the form of an increase
in defaults for dollar denominated loans, compounded by the effects of runaway
local inflation and declining consumer confidence, remains to be seen.
However, President Erdogan's decision to call a snap general election in
June was motivated in part by a recognition that economic volatility was on the
increase and unlikely to improve. His decision to double down on his critics
abroad -- and in the U.S. in particular -- suggests the events of this week have
not dented his characteristic appetite for confrontation.
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
To read the full story
Sign up now for free trial access to this content.
Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.