Fitch warns banking industry in Turkey

International credit rating agency Fitch warned the banking sector in Turkey in its latest report where it said that the refinancing risk of banks in Turkey increased so long as the imbalances in the macroeconomy increased.

Fitch said that the sector's short-term foreign currency borrowing was high and warned that liquidity may come under pressure in case of any fluctuation in the market.

In such a case, the risk of government intervention would increase, Fitch said.
According to Fitch, the $90 billion liquidity of the Turkish banking sector is sufficient to meet short-term market conditions. However, in case of any negative situation in the market, this outlook may change.

According to the agency's estimations, approximately half of the banking sector's FX resources are under the Central Bank in accordance with its reserve requirement obligations.

Fitch calculated that 25 percent of the sector's foreign exchange resources consist of unsecured Turkish eurobonds.

According to Fitch, it is difficult for banks to use this liquidity in case of a situation that will create stress in the markets; This is due to the possibility that they will not be able to obtain their resources quickly from the Central Bank.

At the same time, Fitch said that eurobonds issued by the Turkish state cannot be quickly converted into liquidity in cases where the volatility in the market increases.