Speaking at the opening of the 66th General Assembly of the Banks Association of Turkey (TBB), Minister of Treasury and Finance Mehmet Şimşek said that the banking sector has made significant contributions to Turkey’s growth performance with the strong momentum it has achieved thanks to the structural transformation and good management that it has undergone since the early 2000s. .
Emphasizing that the sector has proven its resilience in the face of the global financial crisis, the recent epidemic and many internal and external shocks, Şimşek said, “(The banking sector) is therefore the most important building block of our economy.”
“Global monetary tightening is probably over”
Şimşek continued his words as follows:
“Global growth is expected to be around 3 percent in the next 5 years, of course, there is also the effect of global monetary tightening, there are structural counterwinds as well. The effect of global monetary tightening is clearly felt. Global inflation is falling, but it is still well above the long-term averages. “The decline is of course important. The global monetary tightening has probably come to an end. We are close. In other words, the possibility of a relaxation has increased since the second half of 2024. In the fight against global inflation, of course, the tightening in financial conditions came together.”
Treasury and Finance Minister Mehmet Şimşek: The simplification and tightening steps we initiated in monetary policy will continue to strengthen our financial stability. pic.twitter.com/A5m48e5EWQ
— TRT News Live (@trthabercanli) August 17, 2023
“Our growth performance continues to be quite strong”
Mehmet Şimşek said that in the last 20 months, 12 developed countries’ central banks have increased their interest rates 104 times, and 158 times in 22 developing countries similar to Turkey, a total of 262 times.
Evaluating it as “positive” that they are approaching the end of the monetary tightening cycle globally, Şimşek continued as follows:
“We hope that as of the second half of 2024, we will face a more supportive environment in global financial conditions. When we look at our country, our growth performance continues to be quite strong. Our country grew by 5.4 percent in real terms, on average, in the 2003-2022 period. Despite these difficult global financial conditions, we foresee a growth of around 4.5 percent. However, the main determinant of growth has been domestic demand for a while. Of course, this strong increase in domestic demand threatens macro financial stability through the current account deficit and inflation. Our country is faced with such problems. has left.”
“The need for rebalancing in our economy is clear”
Şimşek, Minister of Treasury and Finance, stated that the need for rebalancing in the Turkish economy is very clear and said, “We are shaping our policy framework according to this need for rebalancing. As I have said before, transparency, consistency, predictability and compliance with international norms are our basic principles in our economic policies. Within the framework of these basic principles. We shape our economic policies,” he said.
Emphasizing that they will proceed in a system that embraces the freedom of enterprise, free exchange regime, floating exchange rate system, openness and rule-based economy principles, Şimşek said, “Our priority in the short term is, of course, to permanently establish macro financial stability and increase predictability. Money, finance “We create and shape our and credit policies to meet these goals. The simplification and tightening steps we initiated in monetary policy to strengthen our financial stability and increase the functionality of market mechanisms will continue. We will continue to carry out monetary and fiscal policies in coordination.”
“Our country’s eurobond interest rates have decreased by more than 100 basis points”
Minister Şimşek stated that the political uncertainty that decreased after the election and the steps they took in monetary and fiscal policy began to positively affect the expectations regarding the Turkish economy.
“The risk premium of our country has decreased from 700 basis points to around 400 basis points. This has paved the way for all actors in the economy to find external resources at more reasonable costs. Despite the tightening in global financial conditions, our country’s eurobond bond rates decreased by more than 100 basis points. International credit rating agencies “They started to offer a more positive perspective. In fact, a credit rating agency updated the outlook of our banking sector from negative to stable last week. Fund flow to our capital markets has started. All these developments have facilitated access to foreign financing opportunities, while at the same time significantly reducing costs.”
“We will deepen the capital markets”
Şimşek said that the negative net interest margin period, which worried the banking sector, has largely been left behind, and that the banking sector has a healthy outlook with its high asset quality and strong capital structure.
Şimşek said, “Especially in the coming period, we will strengthen and consolidate financial stability with the program of strengthening the financial architecture and infrastructure, and with the reforms we will implement in the financial ecosystem. We will deepen the capital markets and take important steps for the development of sustainable finance, participation finance and insurance sector.”
Emphasizing that they will strengthen risk management in financial markets within this framework, Şimşek continued his words as follows:
“We will follow up the risks and institutions of systemic importance more effectively. We will establish the carbon market. We will ensure that the products of the Central Bank of the Republic of Turkey are compatible with participation finance. We will take additional steps to develop participation-based insurance. We expect them to make stronger use of foreign financing opportunities in the coming period to support them. Therefore, this is our expectation from the sector.”
Mehmet Şimşek, Minister of Treasury and Finance: We will ensure that the products of the Central Bank of the Republic of Turkey are compatible with participation finance. pic.twitter.com/vLXAlLzo20
— TRT News Live (@trthabercanli) August 17, 2023
“The period when private banks focused only on consumer loans should be left behind”
Minister Şimşek stated that there is a need for balancing in domestic demand and emphasized that they expect banks to act in accordance with their programs for the improvement of the current account deficit and the success of the disinflation process.
Pointing out that it is especially important to support exports, Şimşek said:
“Until now, we see that public banks have played a huge role in commercial loans with the financing of exports and investments. We also know the reasons why private sector banks lag behind in this regard. The period when private banks focused only on consumer loans should be left behind. Because the conditions for this have disappeared. This is not sustainable. “There is no longer a justifiable reason. It is our main duty to support the real sector. The real sector will of course be prioritized within the framework of investment, employment, production and export. Here, uninterrupted access of our real sector to finance is indispensable for the continuation of sustainable high growth.”
“In other words, fiscal policy and monetary policy will be in coordination”
Şimşek, Minister of Treasury and Finance, said that at the Union of Chambers and Commodity Exchanges of Turkey (TOBB) meeting held yesterday, the heads of chambers and exchanges from all over the country shared their findings and assessments with them.
Noting that one of the common points of almost all of them is “access to finance”, Şimşek said:
“Our banking sector has always had very strong support, especially in terms of investment, employment, production, exports. We hope that they will continue to grow in line with our policies, in a way that will reduce the current account deficit of our country and control inflation in a more selective way in the coming period. We hope that their support will continue in a stronger way. We will also do our part in this regard. In other words, fiscal policy and monetary policy will be goal-oriented in coordination. As I just said, we see you as a stakeholder. They are very important stakeholders.. We would like to implement the program with you and even design some measures together in consultation with you from time to time.”
“The banking sector will continue to make significant contributions to our economy”
Mehmet Şimşek said that the banking sector has strongly supported the growth of the country to date, thanks to its high-quality human capital, technological infrastructure, experienced management and world-class regulation and supervision system.
Şimşek said, “Of course, the continuation of this is not just a desire, it is a need. We will continue on our way in this framework. We have the slightest doubt that our banking sector, which is one of our most important stakeholders in this period, when we aim for price stability and sustainable high growth, will also make significant contributions with this responsibility in the coming period. does not exist,” he said.
After the opening speeches of the general assembly meeting, a plaque of appreciation was given to former Banking Regulation and Supervision Agency (BDDK) Chairman Mehmet Ali Akben by Minister Şimşek.