News Column

Fitch: Bank borrowing drives rise in Turkey's external debt

September 3, 2014



Most of the recent increase in Turkey's external debt has been driven by bank borrowing, Fitch Ratings says.

"The rapid rise in banks' foreign liabilities, particularly at the short end, leaves them more vulnerable to an extreme stress involving an abrupt and prolonged market shutdown. The increase in external debt was one of the factors leading to the downgrade of Turkey's three largest domestic privately owned banks to 'BBB-', the same level as the sovereign, in June.

"Turkish banks' foreign borrowings increased almost threefold, to $164 billion, between end-2008 and end-1H14, rising to 38 per cent of the country's total external debt from 20 per cent. Sovereign external debt rose more moderately and other sectors' foreign borrowings were largely unchanged. Banks therefore accounted for 71 per cent of the increase in Turkey's foreign debt during the period. Furthermore, banks accounted for virtually all the increase in foreign-currency external debt, as the growth of sovereign external liabilities mainly arose from greater foreign holdings of lira-denominated government bonds."


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Source: CPI Financial


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