Fitch Evaluated The Results Of The CBRT Governor Change

International credit rating agency Fitch Ratings evaluated the results of the CBRT governor change. Fitch noted that the change increased the refinancing risk for Turkish banks.

International credit rating agency Fitch Ratings, in a research note published, stated that the change of chairman of the Central Bank of the Republic of Turkey (CBRT) increased the refinancing risk for Turkish banks. Stating that banks' short-term debt has increased, the international rating agency Fitch stated that at the end of 2020, Turkish banks had less external debt than 2019, but in 2020, the short-term external debt ratio increased compared to 2019. The organization, which predicts that the foreign currency debt service obligations of Turkish banks in 2021 will be around 45-50 billion dollars in an extreme situation such as the complete closure of the markets for 12 months, stated that the foreign currency deposits of residents in Turkish banks increased by 20 percent in 2020 and this helped banks to pay foreign debt.

Dollarization Alert

Fitch pointed out that if the weakening and inflation in the Turkish Lira continues, dollarization may increase, and pointed out that a concrete weakening in confidence or a shortage of cash in companies may lead to a decrease or instability in foreign exchange deposits. The organization stated that orthodox and transparent policies between November and March reduced risk premiums, increased capital inflows, reduced refinancing risks and added value to TL, and noted that the change in the governorship of the CBRT affected policy credibility and increased volatility in the market.   This article has contributions of Bloomberg HT.