ECONOMY

Ecevit says the future of Turkish banking sector is still unclear

ANKARA (Reuters) – Prime Minister Bulent Ecevit said yesterday that overhauling Turkey’s troubled banking sector was an ongoing process and that it was not clear if more banks might have to be taken over by the State or merged. Ecevit called on bankers and industrialists to work together more harmoniously and help Turkey achieve a 3-percent economic growth target for 2002 laid out in a $16-billion economic program with the International Monetary Fund (IMF). Turkey’s banks were at the center of a February 2001 financial crisis that forced a fund managed by the country’s banking watchdog to seize several smaller banks to save the financial system from possible collapse. Ecevit said it was still not clear whether more banks would be taken into the Savings and Deposits Insurance Fund (SDIF), managed by the watchdog, or if some might be forced to seek partnerships. «Sufficiently speedy and predictable results cannot yet be gleaned on the issue of which banks will be taken into the fund and which banks will be merged,» Ecevit told local news channel NTV in an interview. Turkey was last year forced to issue billions of dollars in fresh debt to support the bank rescue plan. Investors reacted cautiously to the results of an IMF-backed audit of the sector last week showing most Turkish banks meeting minimum capital requirements. The audit’s conclusion allowed many leading banks to belatedly release their 2001 results, which showed losses across the board. Turkey’s main share index, dominated by leading banks, has fallen sharply in recent days to its lowest level since October on worries about the sector and political uncertainty brought on by the prime minister’s illness. The 77-year-old Ecevit is now recuperating at home after two extended hospital stays in May to treat a series of ailments, including blood clots in his left leg and a broken rib. The aging prime minister yesterday called on Turkey’s bankers and industrialists to work together more harmoniously as the Turkish Bankers Association (TBB) and the watchdog oversee a corporate debt restructuring plan set to stimulate economic growth. «The banking sector and industrial sector have yet to establish a sufficiently healthy relationship,» Ecevit said. The World Bank has pledged $500 million to help reduce the cost and extend the terms of bad debt several of Turkey’s leading companies owe to banks. Analysts say the plan could be implemented by the end of July but warned that it might require additional funding.