Türkiye urges private banks to reduce consumer lending

Addressing a meeting of the Association of Turkish Banks, Minister of Finance and Treasury Mehmet Simsek called on private banks not to concentrate on consumer lending, but to support the real sector of the economy, Prime reports.

High inflation remains a fundamental problem for the Turkish economy, and it has become difficult for companies to get loans, the Hurriyet newspaper reported earlier.

Annual inflation in Türkiye accelerated to 47.8 per cent in July from 38.2 per cent a month earlier, the Turkish Bureau of Statistics (TUIK) reported. Simsek himself said earlier that he expects a decrease in inflation in the country from mid-2024, and now the country's economy is going through a transition period.

“We see that state-owned banks play an important role in financing exports and investments, as well as in providing commercial loans. We are well aware of the reasons why private sector banks are lagging behind. The period when private banks concentrated on consumer credit must be abandoned, this is not sustainable. There is no more excuse for them, our main duty is to support the real sector,” Simsek said in his address to the Association of Turkish Banks.

Turkey's banking sector has a good outlook "due to its high asset quality and strong capital structure," he said, and uninterrupted access to financing for the real sector is essential for sustained strong economic growth to continue.

“Here, especially in the coming period, we will continue to strengthen financial stability and deepen capital markets through the reforms we will implement in the financial ecosystem as part of the program to fortify the financial architecture and infrastructure. We will strengthen risk management in financial markets, we will control risks and institutions more effectively,” the minister concluded.

Türkiye's central bank said in June it would continue to gradually tighten its policy until the inflation outlook "improves" significantly. The regulator raised this forecast for the end of the year to 58 per cent from the previous estimate of 22.3 per cent. Central Bank Chairman Hafize Gaye Erkan said at the end of July. In June, the Central Bank also raised the discount rate for the first time in more than two years - to 15 per cent from 8.5 per cent and in July continued to increase, bringing it to 17.5 per cent.