Banks can’t and don’t lend
Well, the stab l zat on of the l ra s only the beg nn ng of the story. It s a must. Otherw se, pr c ng behav or won’t change desp te any agreement between the government and the pr vate sector, because t can’t. If cost pressures cont nue and defer nflat on to 2019, whatever one does at some po nt, costs w ll be reflected on to pr ces. But a necessary cond t on – a must - does ne ther exhaust the problem nor the l st of poss ble solut ons. G ven 24.5 percent CPI nflat on, the rates aren’t that h gh, obv ously, but they are h gh nonetheless f we cons der bus ness cond t ons, the poss b l ty of a turnover ncrease, PIM data and all that. Would a home buyer apply for a f xed rate mortgage she w ll pay for 10 years only because the nterest rate fell from 2.5 percent a month to 2 percent. As long as they wa t, they benef t from h gh depos t rates. The IMF World Outlook suggests that Turk sh banks’ costs have r sen by around 150 bas s po nts s nce m d-March. Only Argent na, wh ch had to ncur a 250 bas s po nt synd cat on cost ncrease, and Lebanon
– as an outl er - faced h gher nternat onal fund ng cost ncreases. Even f the l ra stab l zes, econom c act v ty s bound to falter. Banks are not lend ng, because they can’t, because even local depos t growth rates are h gher than loan growth rates now. Depos t growth alone s nsuff c ent to susta n a reasonably h gh loan growth rate. Fund ng from overseas s secure for the t me be ng because many banks have been able to roll the r synd cat ons over and even ssue bank b lls abroad. However, the exact cost s unknown. Now, local depos t t ckets have r sen to somewhere n the range of 25 percent, but they m ght not go up further f banks don’t lend. Why bother to try to attract more depos ts at a h gher marg nal cost f one doesn’t lend? Furthermore, there are two s des to th s lend ng co n. Consumer demand s near zero as well because rates are already far too h gh whatever one does at th s stage. After all, suppose nterest rates fall by 5-10 percentage po nts. Even so, commerc al loan rates w ll only drop so much –or so l ttle - as to hover around 25 percent, wh ch s st ll h gh.