MNI BRIEF: FinStab Impacts of Recent Turmoil Limited - CBRT

The Central Bank of Turkey’s already tight monetary policy stance and swift macroprudential response limited the effect of March’s market turbulence on Turkey’s sovereign risk premium and overall financial stability, while supporting the disinflation process, it said on Friday.

Banks' TL and FX liquidity buffers remain strong, the CBRT said in its May Financial Stability Report, with banks’ borrowing from abroad so far increasing, despite rising global uncertainties.  The rise in funding costs on banks’ balance sheets is therefore considered to be “manageable,” with financial institutions’ profits seen “on a recovery trend.”

Non-performing loans recorded a “moderate” upward trend across the retail and corporate sector since last November, though corporate indebtedness overall declined over the same period. Turkey’s household debt-to-GDP ratio remains significantly low, the CBRT said, with a greater weight of TL-denominated assets in the financial asset composition.