Risks to macroeconomic, financial stability negative for Turkish banks: Fitch

By Ovunc Kutlu

A ANKARA (AA) - There are negative risks to macroeconomic and financial stability for Turkish banks' credit profiles, Fitch Ratings said in a statement Wednesday..

"The challenging Turkish operating environment, deterioration in domestic confidence and further potential weakness in the Turkish lira amid monetary policy uncertainty and high inflation create risks to macroeconomic and financial stability," it said in a statement.

"Turkish banks are vulnerable to exchange-rate volatility due to significant refinancing requirements and deposit dollarization, both of which create risks for foreign-currency liquidity, and high sector foreign-currency lending, where a weaker lira can negatively affect asset quality," it added.

The rating agency said the recovery of the lira and reduced deposit dollarization, if sustained, would be positive for Turkish banks.

Fitch added that the scope, impact and implications of the government's new program, which would compensate local-currency depositors for exchange-rate losses, are uncertain.