More gain than pain from article 64
Citibank: a school for bankers
Banks are vulnerable on two scores: they are the government's biggest creditor and the main sources of their funding is in foreign currency. "Most profits are made from risky positioning, cross-currency funding and treasury operations, not from business directly related to customers," says Melih Araz, a prominent Turkish banker. "Bottom lines are highly vulnerable to currency, interest-rate movements and country-risk variables."
Like all other emerging markets Turkey is experiencing a sharp drop in the inflow of capital and an equally sharp rise in cost. The outlook for both sovereign and private borrowing is not bright. In September, average stripped-yield spreads to emerging markets borrowers were between 900 and 1,200 basis points, or three times higher than the rates of October 1997. The Turkish treasury has seen yields double to 750bp to 800bp. Between now and the end of the year the treasury has a borrowing requirement of $4 billion.
Husnu Akhan, general manager of Korfezbank, believes that under the prevailing conditions the treasury's goal is not realistic. "I don't think the government will attempt any foreign borrowing," he says.