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Money ECB concerns grow over EU banks’ Turkey exposure as lira slides

19:26  10 august  2018
19:26  10 august  2018 Source:   msn.com

Turkey to set out ‘new economic model’ as lira tumbles

  Turkey to set out ‘new economic model’ as lira tumbles Currency drops to record low after Washington meeting fails to show progress on US riftAfter a Turkish delegation to Washington failed to show progress towards the lifting of US sanctions, the lira fell to a new low of TL5.4477 against the dollar, representing a 3.1 per cent decline from its overnight position.

The risk concerning the ECB is that Turkish borrowers may not be hedged against the lira ’s weakness and begin to default on foreign-currency loans, which make up about 40 per The lira ’s slide against the dollar has also left local banks exposed due to the scale of foreign currency borrowing in Turkey .

FRANKFURT (Reuters) - The European Central Bank is increasingly concerned about euro zone banks ' exposure to Turkey , the Financial Times reported on Friday, sending bank shares lower as the Turkish lira hit yet another record low against the U.S. dollar. The ECB , which declined to comment

  ECB concerns grow over EU banks’ Turkey exposure as lira slides © Getty The eurozone’s chief financial watchdog has become concerned about the exposure of some of the currency area’s biggest lenders to Turkey — chiefly BBVA, UniCredit and BNP Paribas — in light of the lira’s dramatic fall.

The Turkish currency has weakened throughout this year — so far, it has lost more than 35 per cent against the dollar in 2018, including a 12 per cent fall on Friday when it hit a new all-time low of TL6.30.

In line with the currency’s decline, the Single Supervisory Mechanism — the wing of the European Central Bank set up to monitor the activity of the region’s biggest banks — has over the past couple of months begun to look more closely at European lenders’ links with Turkey.

Turkish Lira Tumbles as Investors Panic

  Turkish Lira Tumbles as Investors Panic Turkey edged closer yet to a full-blown financial meltdown. Ahead of a much-anticipated public address by President Recep Tayyip Erdogan, the lira plunged more than 11 percent to a fresh record, headed for its worst week since 2001. Speaking outside a mosque earlier today, Erdogan told followers “Don’t forget this: if they have got dollars, we have got our people, our right, our Allah,” according to state media.

FRANKFURT (Reuters) - The European Central Bank is increasingly concerned about euro zone banks ' exposure to Turkey , the Financial Times reported on Friday, sending bank shares lower as the Turkish lira hit yet another record low against the U.S. dollar. The ECB , which declined to comment

FRANKFURT: The European Central Bank is increasingly concerned about Eurozone banks ’ exposure to Turkey , the Financial Times reported on Friday, sending bank shares lower as the Turkish lira hit yet another record low against the US dollar. The ECB , which declined to comment on

Related: Turkey vows to fight back against Trump's 'economic war' as crisis deepens

  ECB concerns grow over EU banks’ Turkey exposure as lira slides © AP It does not yet view the situation as critical. But it sees Spain’s BBVA, Italy’s UniCredit and France’s BNP Paribas, which all have significant operations in Turkey, as particularly exposed, according to two people familiar with the matter.

The ECB is concerned about the risk that Turkish borrowers might not be hedged against the lira’s weakness and begin to default on foreign currency loans, which make up about 40 per cent of the Turkish banking sector’s assets.

Watch: 'Turkey contagion is spreading through banking system into Europe', MacDonald says (Bloomberg)

The lira’s slide against the dollar has also left local banks exposed, because of the scale of foreign currency borrowing in Turkey. Analysts at Goldman Sachs said in a note this week that a depreciation in the lira to TL7.1 against the dollar “could largely erode banks’ excess capital”.

Turkish lira plunges further as Trump threatens tariff action

  Turkish lira plunges further as Trump threatens tariff action Erdogan vows to fight back against ‘economic war’ as government prepares planThe Turkish lira tumbled 12 per cent against the dollar as President Recep Tayyip Erdogan vowed to fight what he described as an “economic war” and Donald Trump said he would step up action against the country.

The Turkish lira plunged to a fresh record low against the U.S. dollar Friday, following a report the European Central Bank is growing more concerned about exposure of regional banks to Turkey . The dollar USDTRY, +5.8871% sank roughly 12% to 6.207 lira

The Turkish lira plunged to a fresh record low against the U.S. dollar Friday, following a report the European Central Bank is growing more concerned about exposure of regional banks to Turkey . The dollar USDTRY, +5.8871% sank roughly 12% to 6.207 lira

  ECB concerns grow over EU banks’ Turkey exposure as lira slides © FT

Europe’s banks opened on Friday under pressure. The Euro Stoxx Banks index dropped 0.5 per cent in early trading, with BBVA, UniCredit and BNP Paribas among those drawing most scrutiny. Shares in BBVA, UniCredit and BNP Paribas were all down more than 3 per cent on Friday morning.

The Turkish finance ministry said on Thursday that the banking sector was protected by its robust capital structure and balance sheets. “Contrary to the speculative statements being made in the market about our banks and our companies, our regulatory institutions do not see a problem posed by the exchange rate or liquidity risks,” it said.

A money changer counts Turkish lira banknotes at a currency exchange office in Istanbul, on August 8, 2018. - The Turkish lira on August 1 slumped to record lows of 5,0 against the dollar as the US hit Turkey's justice and interior ministers with sanctions over the case of an American pastor on trial for terror-related charges. (Photo by Yasin AKGUL / AFP)YASIN AKGUL/AFP/Getty Images © AFP A money changer counts Turkish lira banknotes at a currency exchange office in Istanbul, on August 8, 2018. - The Turkish lira on August 1 slumped to record lows of 5,0 against the dollar as the US hit Turkey's justice and interior ministers with sanctions over the case of an American pastor on trial for terror-related charges. (Photo by Yasin AKGUL / AFP)YASIN AKGUL/AFP/Getty Images

The proportion of the Turkish sector’s balance sheet represented by non-performing loans remains low, at 3 per cent. But Moody’s, the rating agency, said recently that it expected bad debt to rise as economic pressures mount.

Turkish lira at record low as Trump doubles tariffs

  Turkish lira at record low as Trump doubles tariffs Turkey's currency slumped to a new record low as Donald Trump compounded the country's economic crisis by doubling steel and aluminium tariffs. The US president revealed the action on Friday as he noted how the Turkish lira "slides rapidly downward" against the "very strong" US dollar.Amid an escalating feud with Ankara, Mr Trump added on Twitter: "Our relations with Turkey are not good at this time!"The day saw the lira plunge as much as 18% at one point, the biggest one-day drop since Turkey's 2001 financial crisis.Now at a new record low, Turkey's currency has lost more than 40% this year.

FT report that the Eurozone Chief Watchdog are concerns over EU banks ’ exposure to Lira . Among most exposed banks are BBVA and UniCredit. European Banks Hit on Exposure to Falling Turkish Lira .

The Turkish lira plunged to a fresh record low against the U.S. dollar Friday, following a report the European Central Bank is growing more concerned about exposure of regional banks to Turkey . The dollar USDTRY, +7.3720% sank roughly 12% to 6.207 lira

Highlighting debts in the state banking sector, Katalin Gingold, a managing director at Cartica, an emerging markets hedge fund, said: “We think there are a lot of hidden problems in the banking system.”

According to cross-border banking statistics from the Bank for International Settlements, local lenders, including foreign-owned subsidiaries, have dollar claims worth $148bn, up from $36bn in 2006 and euro claims worth $110bn.

Spanish banks are owed $83.3bn by Turkish borrowers, French banks are owed $38.4bn and Italian lenders $17bn in a mix of local and foreign currencies. Banks’ Turkish subsidiaries tend to lend in local currency.

BBVA, UniCredit and BNP Paribas all declined to comment on the ECB’s concerns, as did the ECB itself.

Carlos Torres Vila, chief executive of BBVA, which owns just under half of Turkey’s Garanti Bank, said last month that the group was “really very, very well prepared for the situation”. He added that the bank had reduced the weight of its foreign currency loan portfolio and increased the weight of inflation-linked instruments.

Turkey accuses US of 'stab in the back' as currency tanks

  Turkey accuses US of 'stab in the back' as currency tanks Turkey's central bank says it is ready to take "all necessary measures" to ensure financial stability following the collapse in value of the lira. As the country's bank moved to calm markets rattled by the decline of the Turkish currency, its defiant leader attacked the United States over its use of sanctions.President Recep Tayyip Erdogan accused the US of seeking to "stab" Ankara "in the back" - deepening the row between the two countries.In an address in the Turkish capital Ankara, Mr Erdogan insisted Turkey's economy was strong and said the currency would soon settle "at the most reasonable level".

The Turkish lira plunged to a fresh record low against the U.S. dollar Friday, following a report the European Central Bank is growing more concerned about exposure of regional banks to Turkey . The dollar USDTRY, +6.4067% sank roughly 12% to 6.207 lira

The Turkish lira plunged to a fresh record low against the U.S. dollar Friday, following a report the European Central Bank is growing more concerned about exposure of regional banks to Turkey . The dollar USDTRY, +5.8871% sank roughly 12% to 6.207 lira

This week, analysts asked UniCredit whether it would need to write down its €2.5bn investment in its 40.9 per cent holding in Turkey’s Yapi Kredi, after the lira’s depreciation dragged the stake’s market value down to €1.15bn.

UniCredit responded that Yapi Kredi’s underlying performance was good and the foreign exchange impact would be absorbed by its own reserves. But Goldman analysts said this week that they viewed “Yapi Kredi as the weakest positioned of Turkey’s biggest banks”, in terms of capitalisation.

BNP Paribas holds 72.5 per cent of retail bank TEB. One person close to the French lender said that its exposure to Turkey was “very limited” at close to 2 per cent of overall group commitments.

The person added that TEB represented about 80 per cent of BNP’s commitments in the country and was funded through local deposits and equity. The French bank’s sovereign exposure to Turkey is €1.1bn, primarily through TEB.

Analysts at Autonomous, a research group, estimated it would cost BBVA 13 per cent of its tangible book value in writedowns and lost profits to walk away from its Turkish investment and “hand back the keys to Mr Erdogan”. They said such a step would cost Dutch bank ING 9 per cent of its tangible book value, UniCredit 8 per cent and BNP Paribas 3 per cent.

Additional reporting by Michael Stothard in Madrid, Rachel Sanderson in Milan, David Keohane in Paris and Chloe Cornish in London

Turkish Lira Jumps as Regulator Curbs Bank Swap Transactions .
The Turkish currency rallied after the nation’s banking regulator halved the limit on lenders’s swap transactions, a move that is likely to deter short-selling in the currency.The Banking Regulation and Supervision Agency, or BDDK as it is known in Turkey, cut the limit on lenders’ swap and swap-like transactions to 25 percent of shareholder equity, from 50 percent. That follows a series of steps by Turkish authorities to stem a slide in the currency to a record low on Monday.

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