In a webcast question and answer session, S&P’s lead Turkey analyst Maxim Rybnikov said the domestic currency’s recent stabilisation had helped the situation in Turkey’s financial system, although strains remained particularly in terms of bad, or non-performing loans (NPL).
“We think risk of a banking crisis is still high - the balance of payments risks are elevated and we are concerned about the NPLs, but I think we are looking at a lower probability compared to what we were discussing in August and September last year.”
Rybnikov added that the combined level of problem loans, including both NPLs and restructured loans, was expected to rise to about 20% for the system as a whole.
At the same time he downplayed the likelihood of capital controls in Turkey, saying they were “very far” from S&P’s baseline expectation and would only be used as a last resort by the country’s government.