IN GENERAL, ONE-THIRD of Turkish banks’ assets are in government paper, one-third in loans and one-third is liquid, according to Fitch Ratings.
In no other country are bank assets distributed in this way. No properly run bank would keep a third of its assets liquid, meaning notes piled up in safety deposits. Nor would it invest so much in T-bills.
This bizarre allocation is dictated by Turkey’s extraordinary circumstances. Governments traditionally rely on the Turkish banks to finance the public sector deficit.
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