If the current slump continues to the level of 7 lira per dollar, some Turkish banks could get into big problems, Goldman Sachs analysts say. This would, of course, also be translated into the books of European or American banks trading with Turkish banks. And economic problems would not have to wait a long time for themselves.
Spanish banks owed their banks to 83.4 billion. USD, French banks 38.9 billion. USD and Italy to 17 billion. USD. These are large sums, which in the case of default will have to be depreciated by European banks as losses.
The head of Spain’s Banco Bilbao Vizcaya Argentaria SA’s Turkey unit urged the central bank to tighten monetary policy to contain the lira’s decline.
“Something has to be done about interest rates,” Ali Fuat Erbil, chief executive officer of Turkiye Garanti Bankasi AS, the country’s second-largest bank by market value, said in an interview aired by NTV. “Besides fiscal discipline, monetary tightening is the remedy. Is there need for that? Yes there is.”
His call echoes that of business groups and other bank executives following a plunge in the lira on Monday that extended losses against the dollar this year to 42 percent — more than any other emerging market and major currency. The lira, which pared some of those losses on Tuesday, is being battered by rising tensions with the U.S. over the detention of an American pastor and President Recep Tayyip Erdogan’s unorthodox approach to economic policy, according to bloomberg.com
“There will neither be a seizure of foreign-currency deposits, forced conversions to lira nor a limitation on capital moves,” Erbil said. “Those measures can only be taken if we don’t want to be a part of the global world and this is not our path.”
Not good sign…