Turkey’s Cenbank tells bank executives they are sticking to its policy despite criticism

ANKARA, Nov 8 (Reuters) – Turkey’s Central Bank has told senior bank officials in ongoing talks that it will resolutely pursue market regulation policies criticized by the banking industry, two sources said. present at meetings.

The central bank has tightened its grip on the foreign exchange, bond, loan and deposit markets with a series of measures it says will ensure financial stability, causing the benchmark 10-year bond yield to fall to 10, 5% versus 26%.

Turkish banks, which are now posting record profits, will face a painful setback next year as tough regulations loosen their grip on balance sheets.

The sources, who declined to be identified because the meetings have not been made public, told Reuters the central bank was meeting individually with the chief executives of several banks, including the CEO of Isbank.

The central bank did not comment on the report and Isbank was not immediately available for comment.

Early last week, the CEO of Isbank called on authorities to ease or lift recent measures, including forcing some banks to hold government bonds, saying they were preventing the sector from effectively using resources.

One of the sources said the central bank was giving the message during the talks that “policies directing resources to areas needed for sustainable economic activity will continue.”

The bank will also continue to build “a selective lending position that will increase investment, employment, value-added production and exports,” the source added.

Measures taken by the bank over the past year include encouraging lending to export and production-oriented sectors. He also urged banks to convince customers to convert their savings into foreign currency to support the lira, which has fallen 29% this year after falling 44% in 2021.

The government’s economic program prioritizes low interest rates and aims to increase employment, investment and exports to turn Turkey’s chronic current account deficits into a surplus.

Turkey’s central bank has lowered its key rate by 350 basis points over the past three months to 10.5%, with inflation above 85% in October.

Reporting by Ebru Tuncay and Nevzat Devranoglu; Written by Daren Butler; Editing by Jon Boyle and Raissa Kasolowsky

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Michael J. Birnbaum