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Babacan: Measures to avoid bank bailouts will not mirror US
Speaking at the 2010 İstanbul Industry Forum, organized by the İstanbul Chamber of Industry (İSO), Babacan spoke about the recent wave of rumors that the government would restrict the share of total industry-wide deposits that a bank could hold, a la US regulations. Babacan noted that no concrete decisions had been made on the issue and that the government was only looking to fortify the already-strong Turkish banking sector.
“We’re looking at how we can improve an already-strong system. Many developed nations were forced to use public funds to prop up banks, and sourced these funds from taxpayers. … We therefore wanted to research what we could do in Turkey in the long run to not experience a similar problem later. There haven’t been any concrete steps. I didn’t say that we would be mirroring the US, I just gave the system there as an example,” Babacan stated.
Babacan noted that instead of restricting bank deposits, they were currently in talks with the banking sector to ensure that banks did not need large bailouts in the long run. “We’re talking with small and large banks to start drafting policy to this effect though I stress that no decisions have been made. We’ve only started a process. … Our banks all meet capital adequacy ratios, and their financial balance sheets are fine. We don’t have any doubts about our banking sector right now, and in fact, we’re running stress tests.”
Speaking about the Financial Stability Board (FSB) -- an international organization established in 2009 to ensure global financial stability -- of which Turkey is a member, Babacan noted that Turkey’s strong financial system is a talking point in the board. “We’re implementing some of their standards and good practices gradually, but Turkey is already way ahead of many developed nations in terms of banking regulations,” he added.
Bad checks hit record lows
Babacan also revealed new figures from the Banking Regulation and Supervision Agency (BDDK) regarding non-performing loans and bad checks, underlining that the “gears of the economy were turning smoothly again.” He stated that non-performing loans fell from 5.7 percent of all loans in 2009 to 5.2 percent today, adding that 10.3 percent of all checks bounced in March of last year, whereas in January this number had fallen to a record 3.6 percent -- the lowest since 2006.
Babacan also called for the private sector to invest more in research and development (R&D), stressing that although the government was doing everything in its power to make R&D investments easier for the private sector, the private sector has a larger role to play. Babacan noted that the 2002 government budget allocated only TL 57 million for R&D, but revealed that they had increased this substantially, stating that TL 2 billion would be spent this year.
Calling for the private sector to mirror the government’s R&D investments, Babacan said: “A third of R&D investment is done by the government and the rest by the private sector in the European Union. … If the government spends TL 2 billion, then we want the private sector to invest twice as much, but unfortunately we don’t see that happening today.”
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