Turkey’s banking regulator has eased measures on how banks classify credit to once-troubled companies, helping lenders to potentially avoid adding more non-performing loans to their books, Bloomberg reported.
The Banking Regulation and Supervision Agency (BDDK) will now leave it to lenders to decide which company loans need to be reclassified as non-performing, said sources who asked not to be identified because the changes have not been publicly announced. Banks will not have to book the loans of businesses that have restructured borrowings or bolstered cash flows as non-performing, they said.
The watchdog in September ordered banks to reclassify $8 billion in debt as non-performing by the end of the year and set aside enough provisions to cover them. It is now backing down after banks complained that healthy businesses were included in the list, the people said. The move was aimed at getting banks to write off bad debt faster so they could ramp up lending to help fuel the struggling economy.
A notice of the change to the September directive was sent to banks last month, the people said. Loans already reclassified as non-performing before the November order are not covered, they said.
In September, the regulator said the reclassification of the loans would raise the industry’s non-performing loans ratio to 6.3 percent from 4.6 percent, while the average capital adequacy ratio would retreat to 17.7 percent from 18.2 percent. Banks’ average non-performing loans ratio stood at 5.15 percent in October.