The Turkish banking watchdog, the Banking Regulation and Supervision Agency (BDDK), has lowered the minimum asset ratio for deposit banks from 95% to 90%, and for participation banks from 75% to 70%, effective as from October 1st, 2020. This relaxation of the asset ratio control mechanism comes at a time when the markets are very volatile, with continued pressure on inflation and the Turkish lira despite the recent interest rate hike and the increasing of swap limits.
The BDDK’s press release was as follows:
“As it was stated on the press release dated 10.08.2020, according to the Board of the Banking Regulation and Supervision Agency resolutions dated and numbered 18.04.2020-9000, 30.04.2020-9003, 29.05.2020-9042 and 10.08.2020-9125 it has been required that the Asset Ratio(AR) must be calculated by banks and monthly average of the ratio shall not fall below 95% for the deposit banks and 75% for the participation banks as of the end of each month.
As a continuation of the normalization steps to be taken for the aforementioned Board decisions promulgated during the pandemic period where uncertainties and risks in global markets increased, upon its resolution dated and numbered 28.09.2020-9170, being effective from 01.10.2020, the Board has decided that;
-The AR, which was determined as 95% for deposit banks and 75% for participation banks in the Board Decision 10.08.2020-9125, shall be applied as 90% and 70% respectively, and within this scope;
· Monthly average of the AR ratio shall not fall below 90% for the deposit banks and 70% for the participation banks as of the end of each month, and
· For deposit banks with AR value below 90% and for participation banks with AR value below 70% by the end of relevant month, the excess amount to be taken as basis in accordance with the Article 148/1(a) of the Banking Law shall be calculated as the amount of change in the numerator that will bring the ratio respectively to %90 or %70.”