Some international banks operating in Turkey are lobbying against new rules that would force lenders to agree to debt restructurings, according to three people with direct knowledge of the matter.
The lenders submitted proposals to relax an agreement that says a loan must be restructured if banks with about 75 per cent exposure to the total borrowing agree, the people said, asking not to be identified because the matter is private. These banks are calling for creditors who hold 25 per cent to be given the option of signing, the people said.
Some small Turkish banks are also concerned about the rules that were introduced last month, they said. The Turkish Banking Association, known as TBB, declined to comment.
Banks that account for 90 per cent of loans in Turkey signed a restructuring framework agreement on 19 September and the rest were expected to sign shortly afterward, TBB said at the time. The proposed changes aim to speed up corporate restructuring and help banks avoid booking non-performing loans.
Dissenting banks are concerned that the pact may not be compatible with rules in their home markets and that their parent companies may be reluctant to accept the longer maturities that come with the restructured loans, one of the people said.
Banks are being forced to deal with a rising number of problem loans as Turkish companies struggle to service their foreign debt due to a slump in the lira and a binge on cheap dollar borrowing over the past decade. More than $20 billion of loans have been restructured or are in the process.
According to central bank data, non-financial Turkish companies had foreign exchange assets of $116 billion at the end of July, but foreign exchange liabilities of more than $333 billion. That mismatch leaves the country—and its financial system—vulnerable to any sustained weakening by the lira.
The 13-member Borsa Istanbul Banks Index rose as much as 2.5 per cent and was 1.5 per cent higher at 3:50 p.m. in Istanbul. The benchmark index gained 0.5 per cent. Concerns about the future of Turkish lenders have weighed on the stocks, with the banking index losing almost 31 per cent of its value this year.