Troubled Credit Selling of State Banks to Asset Management Companies in Turkey

In: Dincer H., Hacioglu Ü., Yüksel S. (eds) Global Approaches in Financial Economics, Banking, and Finance. Contributions to Economics. Springer, Cham (2018); ISBN: 978-3-319-78493-9

Posted: 16 Jul 2018

Date Written: June 24, 2018

Abstract

Turkish Banking Sector has grown substantially in recent years. Turkish Banking Sector’s total asset size has reached TL 2,972 billion and total credit size has reached TL 1,919 billion as of 2017 June. On the other hand, an increment is being seen in the troubled credits with credit growth. Total troubled asset size of the sector has reached TL 61 billion as of 2017 June.

Banks try to dispose troubled credits in their balance sheet. In this context, one of the options that banks carry out is to sell of troubled credits to asset management companies. When examining practices in Turkey, it can be seen that private banks have been using this option. However, state banks cannot be able to use the option because of regulation absence. Banking Regulation and Supervision Agency issued a charter to make up the deficiency about state banks’ troubled credit selling to asset management companies on 08.11.2017. Hence, state banks can transfer and benefit from troubled credit selling to asset management companies.

This paper was prepared to make an evaluation about the charter and its probable effects. As a result of study, it was determined that state banks needs to be able to sell credit to asset management companies because their rivals who are private banks have such an opportunity. So, in order to be able to compete with private banks, the regulation is really a need for state banks. Also, state banks’ various indicators which are asset quality, profitability, growth, industry share would be improved by means of the regulation. On the other hand, troubled credits selling of state banks to asset management companies in Turkey may cause reputation risk for state banks because of collection processes and practices of asset management companies.

In general, it can be said that new regulation proposed by Banking Regulation and Supervision Agency would be beneficial to state banks. Taken into consideration that troubled asset size in state banks has reached TL 17 billion as of 2017 March, importance and benefits of new regulation can be understood very well. However, it would be the best that effects of new regulation should be followed up strictly by regulatory authorities specifically Banking and Regulation Supervision Agency. Necessary amendments should be made if negative effects were seen. This paper is the first academic study handling the subject which is about Banking Regulation and Supervision Agency’s charter for state banks’ troubled credit selling to asset management companies.

Keywords: Banking, State Banks, Troubled Credit Selling, Asset Management Companies, Turkey

JEL Classification: G21, G28, H81, K29, Y1

Suggested Citation

Kartal, Mustafa Tevfik, Troubled Credit Selling of State Banks to Asset Management Companies in Turkey (June 24, 2018). In: Dincer H., Hacioglu Ü., Yüksel S. (eds) Global Approaches in Financial Economics, Banking, and Finance. Contributions to Economics. Springer, Cham (2018); ISBN: 978-3-319-78493-9, Available at SSRN: https://ssrn.com/abstract=3201908

Mustafa Tevfik Kartal (Contact Author)

Borsa Istanbul ( email )

Reşitpaşa Mah. Borsa İstanbul Cad. No: 4
Borsa İstanbul Cad. No: 4
Istanbul, 34467
Turkey

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