Run on forex hits Turkish banks

Banking system braces for fallout from biggest currency shock since 2001

OFFICIALS from the Turkish banking regulator and some banks were said to be holding talks on Saturday as the banking system braces for fallout from the biggest currency shock since 2001.

The Banking Regulation and Supervision Agency, known as BDDK, said there was no meeting planned for Saturday and that any consultations with banks were routine. Four people with knowledge of the matter said on Friday that the regulator had asked them to study the impact of interest rate and exchange rate shocks and scheduled a conference call on Saturday. They said they were also expecting to discuss the liquidity situation in the country.

Visits to the branches of three large private lenders on Friday showed that all were struggling to keep up with requests for foreign currencies. At two banks, customers couldn’t receive foreign currency, because the branches were waiting for replenishment from headquarters. One bank couldn’t meet a request to withdraw $5 000 (R70 142).

Other bankers speaking on condition of anonymity also confirmed the up-tick in demand for foreign currency, citing public fear that measures such as capital controls could be implemented to try to stave off a crisis. The Turkish government has repeatedly said that it won’t impose capital controls.

Some banks are being forced to order cash from abroad to meet client demand, according to one person. The Turkish banks are wiring electronic foreign currency to international banks, and then paying a premium to transport physical cash back to Turkey, the person said.

Turks have traditionally held a large proportion of their savings in foreign currencies as protection against runaway inflation and bouts of currency weakness.

About half of the banking system’s deposits are in dollars or euros, according to data.