 'The banking sector grew by 20 percent in 2010 while the credit expansion was around 35 percent,' says Albaraka Türk General Manager Fahrettin Yahşi.. Hürriyet photo |
The Turkish banking sector will shrink this year if the Central Bank increases the required reserve ratio for banks in a bid to control the already-high credit expansion, said Fahrettin Yahşi, general manager of the Albaraka Türk Participation Bank, a Turkish lender operating on Islamic banking terms.
The credit expansion has one negative and one positive main effect, Yahşi said: contribution to growth and the risk of boosting the current account deficit. He spoke with the Hürriyet Daily News & Economic review after a meeting to launch the lender’s cooperation with Istanbul’s Esenler district municipality for a banking card for residents. (source)
“The banking sector grew by 20 percent in 2010 while the credit expansion was around 35 percent,” he said, associating the around 8 percent growth with these elements.
“On the other hand,” he said, “as Central Bank Gov. Durmuş Yılmaz said earlier, credit expansion has a negative effect on the current deficit. According to the bank, if the credit expansion rate passes 25 percent of the banks reserves, it will cause an increase in the deficit,” Yahşi said.
The Central Bank recently pulled 17 billion Turkish Liras from the market in a move to control the credits, he recalled, calling it a right move. “Still, this will have negative effect on the profits of banks. I foresee a very tight year for banks as the costs are increasing.”
However, participation banks have some important advantages as there are in close interaction with real sectors, the general manager said. “It is a system where costs and profits are shared so there is not a risk that any costs deriving from a maturity mismatch would only be undertaken by the lender.
“The decisions by the Central Bank might only be observed in the long run, but if it decides to increase the required reserve ratio, this will harm banks in the short term,” he said. “Thus, if such a move would be beneficial for banks in the future, we, as the country, should abide the difficulties.”
Albaraka plans a sukuk, or Islamic bond, sale in September or October, Yahşi said Wednesday on CNBC-e television. The bank may offer at least $100 million of sukuk this year, Yahsi said in an interview on Jan. 6.
The Islamic banking system avoids implementing interest rates.
Source : http://www.hurriyetdailynews.com/n.php?n=turkish-participation-bank-executive-warns-on-central-bank-move-2011-03-02 - March 3, 2011
The credit expansion has one negative and one positive main effect, Yahşi said: contribution to growth and the risk of boosting the current account deficit. He spoke with the Hürriyet Daily News & Economic review after a meeting to launch the lender’s cooperation with Istanbul’s Esenler district municipality for a banking card for residents. (source)
“The banking sector grew by 20 percent in 2010 while the credit expansion was around 35 percent,” he said, associating the around 8 percent growth with these elements.
“On the other hand,” he said, “as Central Bank Gov. Durmuş Yılmaz said earlier, credit expansion has a negative effect on the current deficit. According to the bank, if the credit expansion rate passes 25 percent of the banks reserves, it will cause an increase in the deficit,” Yahşi said.
The Central Bank recently pulled 17 billion Turkish Liras from the market in a move to control the credits, he recalled, calling it a right move. “Still, this will have negative effect on the profits of banks. I foresee a very tight year for banks as the costs are increasing.”
However, participation banks have some important advantages as there are in close interaction with real sectors, the general manager said. “It is a system where costs and profits are shared so there is not a risk that any costs deriving from a maturity mismatch would only be undertaken by the lender.
“The decisions by the Central Bank might only be observed in the long run, but if it decides to increase the required reserve ratio, this will harm banks in the short term,” he said. “Thus, if such a move would be beneficial for banks in the future, we, as the country, should abide the difficulties.”
Albaraka plans a sukuk, or Islamic bond, sale in September or October, Yahşi said Wednesday on CNBC-e television. The bank may offer at least $100 million of sukuk this year, Yahsi said in an interview on Jan. 6.
The Islamic banking system avoids implementing interest rates.
Source : http://www.hurriyetdailynews.com/n.php?n=turkish-participation-bank-executive-warns-on-central-bank-move-2011-03-02 - March 3, 2011
