BRSA tells banks to re­clas­sify $8.1 bil­lion debt as NPL

Dünya Executive - - BUSINESS BY LAW -

The Bank­ing Reg­u­la­tory and Su­per­vi­sory Author­ity is­sued a press re­lease on Septem­ber 17 af­ter the com­ple­tion of the fi­nan­cial struc­ture re­view and im­pact anal­y­sis.

The BRSA’s fi­nan­cial struc­ture re­view re­vealed that TRY 46 bil­lion worth of loans should be clas­si­fied as NPLs. These NPLs be­long mostly to en­ergy and con­struc­tion com­pa­nies. In this respect, the banks which are no­ti­fied by the BRSA will need to re­clas­sify these loans and set aside the re­quired re­serves by the end of 2019. The BRSA fur­ther stated that the Turk­ish fi­nan­cial in­sti­tu­tions’ global cap­i­tal ad­e­quacy ra­tio fell from 18.2 per­cent to 17.7 per­cent, whereas the rate of NPLs in­creased from 4.60 per­cent to 6.30 per­cent. Lastly, the BRSA stated that the to­tal amount of Com­mon Eq­uity Tier 1, Ad­di­tional Tier 1 and Tier 2 (ex­cept earn­ings con­tri­bu­tions) in the bank­ing sec­tor in­creased to TRY 49 bil­lion in the last twelve months.

The BRSA’s anal­y­sis sug­gests that the bank­ing sec­tor main­tains a sound cap­i­tal struc­ture while a sub­stan­tial amount of loans needs to be re­clas­si­fied as NPLs.

Basell III’s cap­i­tal ad­e­quacy floor is 8 per­cent and the BRSA has been imposing 12 per­cent for the Turk­ish mar­ket for sev­eral years whereas the ac­tual cap­i­tal ad­e­quacy is still re­mark­ably above this rate - 17.7 per­cent.

It is ex­pected that the re­clas­si­fi­ca­tion will ramp up con­cerned banks’ lend­ing as it will be a ma­jor step to clean up the bal­ance sheet with­out any need for fresh cap­i­tal.

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