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"Turk banks warned on growth, changes seen"

01 March 2011 [19:02] - TODAY.AZ
Turkey's banking regulator (BDDK) is warning banks whose loans are growing particularly fast as it seeks to keep credit growth within the 20-25% in 2011 which the central bank says is financially sustainable, Reuters reported.

A BDDK official speaking on condition of anonymity told Reuters they expected to see results from the warnings in 15-20 days.

Bank loans grew 34% in 2010, driving the current account deficit to record highs and prompting the central bank to introduce daring new policies last December to curb inflows of hot-money and cool loan expansion.

The central bank raised banks' required reserve ratios by a total of 400 basis points in December and January, to offset rate cuts it made to reduce Turkish yields and ensure an overall tightening effect.

But there are deep doubts about how effective the policy has been in a fast-growing country where demand for loans is huge. The central bank has said it will wait for March data to assess the impact of the policy, which analysts fear exposes the Turkish economy to higher inflation.

Weekly data released on Monday by Turkey's banking watchdog (BDDK) showed total banking sector loans as of Feb. 18 rose 35.6% on the year to 550.3 billion lira, and 2.8% since the start of the year.

Warnings could be followed by measures to raise the cost of loans, the official said, but the suspension of new branch openings for outperforming banks, as suggested by Sabah newspaper, was a last resort and not seen as necessary.

"Banks can lend from existing branches, I don't see how trying to limit the current trend can work. It will not change demand for loans in the economy... the economy decides on loan growth," said Alpay Dinckoc, banking analyst at Oyak Securities.

"If a bank turns away one consumer they could always go to another bank. There is substantial competition in the market."


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