Turkish turbulence

Global Finance, Jun 2003 by Johnson, Mark

Advancing private sector credits is expensive in capital terms. "Should the banks grow their lending, the higher share of risk assets will increase and cause current capital adequacy ratios to fall," says S&P's Emmanuel Volland. That's not all that is stopping much-needed loan growth. While Turkish companies want to borrow, the country's banks are reluctant to lend. "We're still not comfortable with the balance sheets of Turkish corporates," says Egemen. He points out that many companies still play Treasury bill markets, for example.

With the banking sector put on a much more secure footing, and some key structural reforms in place, all eyes are on the high wire progress of the government. But deeper down, there are still fundamental shifts needed in the relationship between the state, lenders and the real economy. Turkey's banks may have ceased to be the problem, but they've yet to become part of the solution.