11/13/2009

Banks boom in Turkey without government aid

Houston Chronicle - In Turkey, bank profits have risen more than 40 percent this year, though at first glance that might not seem exceptional. After all, profits have surged at US banks too, spurring a stock market rally that has wiped clean most of the losses from last year's economic meltdown. But there's a difference: Turkey's banks posted those profit gains without any government assistance. Profits for the entire Turkish banking industry totaled USD 10.5 billion for the first nine months of the year, according to government data. At a time when the recession has hammered many European banks, Turkey's financial institutions have weathered the crisis remarkably well. The Turkish government restructured the financial system, boosting the banks' capital requirements and raising the mandated ratio of capital to risky assets to 12 percent from 8 percent. Another difference: Turkish banks had almost no exposure to subprime loans or derivatives. The result is that Turkish banks now have some of the world's strongest capital structures. Those capital reserves, and the absence of risky lending practices, helped shield them when the recession hit. For example, Garanti Bankasi, one of the country's largest lenders partially owned by General Electric, maintains a capital ratio of almost 18 percent, according to the bank's financial filings, far higher than most US banks.

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