CHANGES TO TURKISH BANKS’ EQUITY ACCOUNTS

Dünya Executive - - OVERVIEW -

As prepared by the Banking Regulation and Supervisio­n Agency (BDDK), the regulation on the Amendment of the Regulation on the Equity of Banks was published in the Official Gazette and took effect last week. Thus, the net book value of those that cannot be withdrawn even after five years from the date of acquisitio­n of the commoditie­s and real estates are obliged to acquire due to the receivable­s of the banks, will be deducted from the sum of the main capital and the contributi­on capital will not be in force.

What did they say? Ex-Treasury Undersecre­tary Hakan Ozyildiz:

Before the 2001 crisis, the banks were able to use their immovables and some commoditie­s in their hands to increase their capital.

Appraisal companies were showing these properties at higher values. Thus, inflating the equity accounts of those banks. At that time, a measure was taken to prevent this. I said: “You’re a real estate company, not a real estate agent. You can keep these properties in your active assets but you cannot include them in your equity accounts after five years. At the end of five years, you must either sell the property or remove it from your equity account.” The five-year period was later reduced to three, but now we see that this regulation has been lifted. With the removal of this item, non-residents will remain in the bank’s capital. It will relieve those banks with equity problems.

CHP İzmir Deputy Selin Sayek Böke:

With this change, the banking system has done away with internatio­nal regulation­s and the equity of the banks will be increased.

CHP Tekirdag deputy Faik Oztrak:

The arrangemen­t will make “banks like real estate agents, but not banks.” This regulation of the BDDK reinforces the perception that banks are facing difficulti­es due to problemati­c housing loans. The cure is worse than the disease.

Economist Ugur Gurses:

The BDDK wants to relieve some of the banks in terms of capital adequacy so that they can give more credit.

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