Turkey’s banks are one of the country's economically strong points, with the sector having good core capital ratios compared to those in the European Union, the chief executive officer of Garanti BBVA, the country’s second-largest private lender, said Thursday.
"For a long time, banks in Turkey have been in a good place in terms of capital, liquidity and strength," Onur Genc noted in an exclusive interview with Anadolu Agency.
Onur Genc, CEO of Garanti BBVA
Capital is like the blood of banks, he stressed, saying the core or total capital ratios of the Turkish banking sector are always above those in the EU and US.
"When we look at the world’s banks, they were caught prepared for the [coronavirus] pandemic in a general aspect," he said, noting the capital adequacy ratios (CARs) of US and EU banks were around 12%-13% at the beginning of this year.
The same ratio was around 7% for both the EU and US when the global financial crisis began in 2008, he said.
"Turkey is in a strong position in terms of public finances as well," he explained, yet suggested that the country should pay attention to the balance of payments, which has seen current deficits for many years.
The Turkish government has been trying to eradicate the current account deficit accumulated over the years through a very accurate rebalancing process, he said.
"Last year, our country saw a current surplus, not current deficit," he said, warning the country should be careful about the balance of payments as well as dependence on external sources created by the current account deficits of the past.
Turkey is trying to manage this now, he emphasized.
Pandemic will not cause global banking crisis
Assessing the impacts of the pandemic, Genc said it will not cause a global banking crisis.
However, he added, the biggest negative effect of the virus will be an increase in profitability and credit costs as well as credit sunk costs.
The banks are good when the economy is good, but they are bad when the economy is bad, he stressed.
"When we look at the countries where we operate, serious negative growth in non-performing loans is mentioned almost everywhere," he said.
It was a serious shock to the economies, he said, adding therefore, in certain sectors, in some customer segments, especially with small businesses, on the individual side, the banking sector may face serious sunk costs.
"In short, I think there is enough buffer on the capital side, although profitability will be seriously affected," he said, adding the banks can handle this situation.