Turkey - Foreign creditors get Clean Hand's protection
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Turkey - Foreign creditors get Clean Hand's protection

The number of banks seized by the government in Turkey has recently risen to 10 but foreign banks still manage to elude having their fingers burned.

Metin Munir

So far the new Banking Regulation and Supervisory Agency (BRSA) has cautiously protected foreign creditors by choosing the vastly more costly route of taking over banks rather than liquidating them.

But, as officials privately warn, this will not go on forever. Once the Agency becomes established and the new ground rules are understood by everyone, banks will either sink or swim - with all their liabilities outside private saving accounts.

According to BRSA officials: "There may be other weak banks in the system but we hope to keep them outside the agency. When the supervisory mechanism is securely in place and so long as there is no ill intent, fraud or corruption in the picture, the agency will work with the existing management at these banks to restore their financial health."

Says another source: "There is no doubt that the agency and its staff command much respect in the banking community and they inspire much confidence. Our findings suggest that we can rely on the experience and integrity of the Board."

But it is not totally for the love of foreign banks that Turkey has been taking over the failed banks.

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