Government eases borrowing limits
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Daily News with wires
Oluşturulma Tarihi: Haziran 16, 2009 00:00
ISTANBUL - Economy Minister Ali Babacan announces that the government is easing restrictions on Turkish companies to borrow from the international market. The change is expected to give companies better access to credit. The government also aims to create relief for individuals with rising credit card debts
The government has revealed a series of measures to ease restrictions on local companies’ ability to obtain foreign exchange loans on the international market and to reschedule credit card debtors’ payments.
Economy Minister Ali Babacan said Monday in a televised press conference that lifting the restriction on Turkish companies, applicable to those with no foreign exchange revenues, would help reduce foreign debt.
"The most important aspect of this new regulation is that those companies with no foreign currency revenues will be able to use foreign currency loans under certain limits," Babacan said, adding the amount such companies could borrow from banks in Turkey must exceed $5 million and have a maturity exceeding one year.
The change will give companies better access to credit and help end a system under which companies borrowed in dollars or euros through foreign branches of Turkish banks, he also said, adding the regulations also lift a limit of 18 months on foreign borrowing for companies that have earnings in dollars or euros.
Turkey's long-term external debt stock stood at $139 billion for the private sector at the end of 2008, of which $35 billion was borrowed through banks' overseas branches.
He said the new regulation would also prevent individuals using foreign currency or foreign currency-indexed credits both from local and foreign banks.
Removing huge risk
"We aim to remove completely the foreign currency risk that individuals face with this new regulation. É We will be able to meet the financial needs of the manufacturers with keeping our foreign exchange savings within the local banking system as a result of this regulation," he said.
Babacan said the government had prepared a new plan but tax cuts would not continue in their present form when asked about the extension of cuts in sales tax, which have helped stimulate demand in some of the worst-hit economic sectors and are due to expire Monday.
The popular cuts were first applied in March for a duration of three months and saw tax rates fall to 18 percent from 37 percent on car sales. Lower rates were also applied to white goods, consumer durables and electronics goods.
Ersin Özince, chief of the Turkish Banking Association, who attended the press conference with Babacan, welcomed the move, saying this was one of the most important regulatory changes in years.
To circumvent current regulations, companies borrow through Turkish banks' overseas branches, a move which greatly increased Turkey's foreign debt level. "This anomaly created volatility and that will now be reduced with a more accurate picture of the corporate sector's debt level and overall foreign debt level," Bloomberg quoted Yarkın Cebeci, an economist at JP Morgan in Istanbul, as saying in a note to clients.
Another analyst agreed that easing restrictions would help firms roll over debts. "Turkish companies have ... an open foreign-exchange position. If they can borrow more easily it will help them roll over debts. This may also stimulate banks to give credits more readily," said Erkin Işık, an economist at Fortis Bank.
The new regulations also target creating relief for individuals amid rising credit card debts. The government invited credit-card debtors to apply to reschedule the payments they owe banks under a low- cost repayment schedule.
The new regulations will include vis-a-vis annual fees for credit cards, minimum payments and credit card debts. Banks have agreed to waive some of the fines and interest on the debts in a bid to slow an expansion of non-performing credit card debts, Babacan also said, adding the new payment schedules cover about $3.1 billion Turkish Liras ($2 billion) in non-performing loans on a total of 1.3 million cards. More than half of the debts are for less than 1,000 liras, he said.
For credit cards whose credit limit was more than 3,500 liras, the annual credit card fee cannot exceed 1 percent of the card’s limit. "For credit cards whose limit is 3,500 liras or less, the annual credit card fee may not be more than 35 liras," Babacan said.
With the new arrangements, the Banking Regulation and Supervision Agency may increase minimum payments up to 30 percent of the debt due or reduce it to 10 percent of the total debt, he said adding, credit card debts due as of May 31 may be paid back under a new payment plan.
According to the information given during the press conference, the total amount of non-performing credit card debt stands at 3.1 billion liras, from 1.3 million credit cards used by almost 875,000 people.
Economy Minister Ali Babacan said Monday in a televised press conference that lifting the restriction on Turkish companies, applicable to those with no foreign exchange revenues, would help reduce foreign debt.
"The most important aspect of this new regulation is that those companies with no foreign currency revenues will be able to use foreign currency loans under certain limits," Babacan said, adding the amount such companies could borrow from banks in Turkey must exceed $5 million and have a maturity exceeding one year.
The change will give companies better access to credit and help end a system under which companies borrowed in dollars or euros through foreign branches of Turkish banks, he also said, adding the regulations also lift a limit of 18 months on foreign borrowing for companies that have earnings in dollars or euros.
Turkey's long-term external debt stock stood at $139 billion for the private sector at the end of 2008, of which $35 billion was borrowed through banks' overseas branches.
He said the new regulation would also prevent individuals using foreign currency or foreign currency-indexed credits both from local and foreign banks.
Removing huge risk
"We aim to remove completely the foreign currency risk that individuals face with this new regulation. É We will be able to meet the financial needs of the manufacturers with keeping our foreign exchange savings within the local banking system as a result of this regulation," he said.
Babacan said the government had prepared a new plan but tax cuts would not continue in their present form when asked about the extension of cuts in sales tax, which have helped stimulate demand in some of the worst-hit economic sectors and are due to expire Monday.
The popular cuts were first applied in March for a duration of three months and saw tax rates fall to 18 percent from 37 percent on car sales. Lower rates were also applied to white goods, consumer durables and electronics goods.
Ersin Özince, chief of the Turkish Banking Association, who attended the press conference with Babacan, welcomed the move, saying this was one of the most important regulatory changes in years.
To circumvent current regulations, companies borrow through Turkish banks' overseas branches, a move which greatly increased Turkey's foreign debt level. "This anomaly created volatility and that will now be reduced with a more accurate picture of the corporate sector's debt level and overall foreign debt level," Bloomberg quoted Yarkın Cebeci, an economist at JP Morgan in Istanbul, as saying in a note to clients.
Another analyst agreed that easing restrictions would help firms roll over debts. "Turkish companies have ... an open foreign-exchange position. If they can borrow more easily it will help them roll over debts. This may also stimulate banks to give credits more readily," said Erkin Işık, an economist at Fortis Bank.
The new regulations also target creating relief for individuals amid rising credit card debts. The government invited credit-card debtors to apply to reschedule the payments they owe banks under a low- cost repayment schedule.
The new regulations will include vis-a-vis annual fees for credit cards, minimum payments and credit card debts. Banks have agreed to waive some of the fines and interest on the debts in a bid to slow an expansion of non-performing credit card debts, Babacan also said, adding the new payment schedules cover about $3.1 billion Turkish Liras ($2 billion) in non-performing loans on a total of 1.3 million cards. More than half of the debts are for less than 1,000 liras, he said.
For credit cards whose credit limit was more than 3,500 liras, the annual credit card fee cannot exceed 1 percent of the card’s limit. "For credit cards whose limit is 3,500 liras or less, the annual credit card fee may not be more than 35 liras," Babacan said.
With the new arrangements, the Banking Regulation and Supervision Agency may increase minimum payments up to 30 percent of the debt due or reduce it to 10 percent of the total debt, he said adding, credit card debts due as of May 31 may be paid back under a new payment plan.
According to the information given during the press conference, the total amount of non-performing credit card debt stands at 3.1 billion liras, from 1.3 million credit cards used by almost 875,000 people.