The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.

Sinking or sailing together

Turkish banks' dependence on earnings from treasury bills has put them in the same ramshackle boat as the government and rendered them apathetic towards innovation and consolidation.

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. Funds from other sources are limited because the country is not deemed to be a very safe investment venue.

Turkish banks are not too unhappy about this situation because spreads on government paper are enormous. Last year, real return on government bonds was 33%. Of course there is always the danger that the government might default or, as happened in 2001, restructure part of the debt. Demirbank, a medium-size bank acquired by HSBC, crashed because it had invested virtually everything in T-bills. However, these risks do not seem so big or ominous to local bankers. Some banks have more than 40% of their assets in T-bills. In state banks the ratio is even higher.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree