Turkey’s banking watchdog, the Banking Regulation and Supervision Agency (BDDK) has announced today that it will repeal the calculation of the Asset Ratio (AR), as of end of 2020 as part of the normalization steps. This move had a positive effect on the Turkish lira which strengthened 1.3% against the US dollar, and the Borsa Istanbul's banking index gained 3%.
BDDK had decided to implement the AR requirement in April "to accelerate the flow of bank funding into the economy, thereby mitigating the adverse economic effects of the COVID-19 pandemic." The ratio was designed to improve credit flow to small and medium-sized enterprises and exporters, encourage financing projects and promote banks to reduce the gap between their foreign exchange assets and liabilities.
BDDK’s press release on this issue was as follows:
“As it was mentioned in the previous press releases, 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, 28.09.2020-9170 and 26.10.2020-9238, banks have been required to calculate and meet the Asset Ratio(AR).
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numbered 24.11.2020-9271, the Board has decided that all the aforementioned Board resolutions regulating the AR will be repealed as of 31.12.2020.”