Quarter of Turk loans are bad

ANKARA (Reuters) – Turkey’s banking watchdog said yesterday that 25 percent of the total loans extended by banks included in an IMF-backed audit of the crisis-hit sector were bad loans. Turkey is implementing a plan, called the Istanbul Approach, to help banks and companies restructure bad loans that have mushroomed since a financial crisis ripped through its economy early last year. The watchdog said in a report on a recent bank recapitalization program that the independent audit of 25 private banks had led to a revision of the estimate of the percentage of bad loans to 25 percent from 7 percent. The watchdog said a gross 7,821 trillion lira (some $5 billion) in loans extended by the 25 banks were bad loans. Of the 25 percent, the watchdog classed 32 percent ($1.6 billion) as a loss on the banks’ balance sheets. It said the collection of a further 52 percent of the loans was doubtful and 16 percent provided a limited opportunity for collection. Turkey has slated a $500-million loan pledged by the World Bank to help with the loan restructuring plan. Analysts have said Ankara may need to request more cash from the IMF and World Bank to help with the plan banks and firms are expected to conclude by the end of July at the earliest. Turkey’s President Ahmet Necdet Sezer yesterday ratified a package of laws easing foreign participation in state tenders and encouraging a return of capital to the crisis-hit economy. The package is part of a series of reforms Turkey had pledged the IMF to pass ahead of a fund board meeting tentatively scheduled for late June and due to consider a latest $1.1-billion loan tranche under Turkey’s $16-billion pact. The measures include lowering the minimum bidding threshold at which foreign companies can participate in state tenders. Changes will also be made to the way the tenders are announced. Ankara hopes that will encourage a return of capital from abroad to help Turkey achieve a 3-percent economic growth target this year after a 9.4-percent contraction in 2001.

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