Treasury bill famine drives consolidation
The Turkish government is committed to banking consolidation, privatization and restructuring. It will also sell off the ailing banks it has taken under its wing. The country’s numerous banks are no longer able to live off interest payments from government debt. Metin Munir reports
The banking system is likely to be the most serious long-term test of the Turkish government's compliance with the IMF programme negotiated last year.
The banking environment changed dramatically after the IMF stand-by agreement went into effect late in 1999. Turkey undertook to put in place and enforce stringent banking regulations. The IMF refused to put its signature to the accord before Turkey seized five weak banks that were being kept afloat for political reasons. A new banking supervisory agency started work in September and is entrusted with maintaining a healthy banking sector. Its agenda includes the sale of eight banks that were seized by the central bank and consolidation of the system, including the privatization of state banks.
Mopping up on treasuries
Turkish banks, with few exceptions, grew fat and inefficient on profits they made from investing in treasury bills. This rich source is drying up. The economic programme has reduced the public sector borrowing requirement and with it the state treasury's reliance on the domestic market for financing it. Last year, profit margins on bank's Turkish lira disbursements were an average 30% and on foreign currency 6%. In August, these were 12% and 1.5%