Turkey’s government is considering a capital injection for state-owned banks so they can prop up businesses hit by the coronavirus pandemic, according to people with knowledge of the matter, Bloomberg reported.
Work on the plan has just begun, and it’s not yet clear how much funding the lenders will receive should the capitalization go ahead, the people said, asking not to be identified because the matter is private. One option includes the Treasury issuing lira-denominated bonds to fund the program, they said.
Efforts are focused on the three main state-owned lenders — TC Ziraat Bankası AŞ, the country’s biggest bank, Türkiye Halk Bankası AŞ and Türkiye Vakıflar Bankası TAO — whose buffers are being eroded by heavy lending, the people said. There is no clear timing on the plan, which may not proceed, they said.
Turkey is weighing a second capital boost for its lenders in a year as state-owned banks compensate for slower lending by their private peers in a bid to keep the economy afloat. Lenders around the world are being relied on to pass stimulus to their customers, while governments including Germany and France have pledged to guarantee billions in corporate loans to cope with the COVID-19 outbreak.
Halkbank and Vakıfbank shares rose as much as 1.5 percent and 1.3 percent, respectively, while the 12-member Borsa İstanbul Banks Sector Index was trading 0.2 percent up as of 2:09 p.m. local time.
President Recep Tayyip Erdoğan and Treasury and Finance Minister Berat Albayrak have criticized private lenders for their reluctance to lend to distressed companies.