Speaking to reporters following a meeting he had with members of the Turkish Banks Association (TBB) as well as Central Bank of Turkey Governor Erdem Başçı and Capital Markets Board (SPK) President Vedat Akgiray on Friday, Babacan praised the health of the Turkish financial sector at a time of growing worries over the prospects of the banking industry, particularly in Europe. “Now we see our banks are concluding this year with prudence and utmost self confidence. There certainly are some risks ahead of us next year, and it is a necessity to be prepared against those risks and different scenarios we may face. But we, both the government and the banking sector, are now experiencing our era of perfection,” he said. “Our banks successfully overcame difficult years. Although both 2010 and 2011 were very troubling for the banking sector in many other countries, our banks exhibited a high performance in that period. When you look at them today you see robust balance sheets and a macro profit rate. You also realize that the amount of debt they could not collect is almost at a record-low, and their capitalization is as good as it could ever be,” he added.
As Babacan was making those statements on Friday, the latest news relating to the unhealthy nature of the banking industry in Europe hit online media portals. According to European Central Bank (ECB) data, banks from the 17 countries that use the euro stashed 347 billion euros ($453 billion) overnight with the ECB on Thursday, in another sign that Europe's banks remain wary of each other despite a massive credit operation earlier this week. The figure announced on Friday is the highest for 2011, topping the 346.4 billion euros earlier this month.
It's a sign of unease in the interbank lending market where banks raise operating funds and suggests banks are depositing money with the central bank at low interest rates because they are afraid to lend it to other banks for fear they won't get paid back.
Europe is suffering from a debt crisis marked by concerns that heavily indebted governments such as Italy may be unable to pay off their bonds. That means trouble for banks because they typically hold government bonds. The large deposits come despite Wednesday's massive central bank credit operation, in which the ECB let banks borrow as much as they wanted for up to three years. As a result 523 banks took 489 billion euros, the largest ECB loan operation in the 13-year history of the euro. The ECB has stepped up lending to banks to help them get through the crisis. Some of the banks are finding it impossible to raise money elsewhere, so the bank steps in as lender of last resort, a typical role for central banks in times of turmoil.
In Ankara, on the other hand, the Turkish Central Bank increased the required reserve ratios for banks in the country for most of the year, forcing them to keep more of their reserves in the central bank's accounts as part of its policy aimed at taming the credit expansion.
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Source : todayszaman.com
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