ECONOMY

Turkish banks ready for currency reform

ANKARA – Turkey’s banking sector expects a problem-free transition to the country’s new currency as officials ready to shave six zeroes off the embattled money in a major reform underscoring the fight against chronic inflation. On January 1, Turkey will launch the New Turkish Lira, or YTL, which will turn one million lira into one new lira, in a move buoyed by a strong rebound from one of the country’s worst recessions in decades. However simple the conversion may sound, it involves a major and hugely expensive operation by the country’s 35 private and public banks to update their systems and convert millions of accounts into the new currency as midnight rings in 2005. But representatives are confident they will be able to pull through with flying colors after months of preparation. «I would say the banking sector is the one sector that is best prepared for the conversion,» said Haluk Erdogan, executive vice president of Akbank, a private bank operating more than 600 branches. «Since June, all banks have been working in cooperation with the Turkish Banks’ Association to ensure a smooth conversion. Several tests have been carried out and I expect no big problems,» he added. Erdogan said his bank had spent nearly 4 trillion Turkish liras (about $3 million) to update their system. «The update is a very costly operation but it minimizes the risks,» he added. There has so far been one official warning of a possible problem: a temporary cut in bank machine and credit card services on New Year’s as authorities switch off the central system which regulates credit card and debit card services. The actual system will be switched off for 5 minutes from 11.58 p.m. (2158 GMT) on December 31 to 12.03 a.m. (2203 GMT) on January 1 to allow for the necessary update, but the Banks’ Association has warned that the cut in services may stretch from one to four hours, depending on different banks. «I advise people to go out with cash if they do not want to have any problems,» central bank Governor Sureyya Serdengecti said in an interview last week. He underlined that the central bank would be on duty during the conversion hours in order to assist banks with any problems that might emerge. According to Sinan Gurlen, responsible for system operations at Disbank, a medium-sized bank with nearly 170 branches, the date for the conversion is timely. «There will be plenty of time for banks to close their year-end accounts and convert their entire system before opening up on January 3,» a Monday, he said. Authorities have also taken precautions on the Istanbul Stock Exchange, announcing that there will be no share transactions on December 30 and 31. «All brokerage firms have already updated their systems with the knowledge of the Capital Markets Board,» the regulatory authority in charge of securities markets in Turkey, said Ali Pamukcu, finance director at HC Istanbul. «We have been carrying out tests since June and my opinion is that the transition will be trouble free,» he added.