"Regulation on Restructuring of Debts to the Financial Sector" published in the Official Gazette had constituted the first legal framework of the ruling Justice and Development Party (AKP)’s extensive operation for bailing out big capitalist groups.
As a debt restructuring plan resembling the Istanbul Approach implemented after the financial crisis of 2001 under the responsibility of The Banking Regulation and Supervision Agency (BRSA) is being prepared by the Turkish government, the Banks Association of Turkey (TBB) announced that "The Framework Agreement on Financial Restructuring" was signed by banks and other financial institutions which have almost %90 shares in total loans.
It is stated in the announcement that "The purpose of the Financial Restructuring plan is to support the enterprises having difficulties in paying their debts and loans due to temporary disruptions in the balance of income and expenditures."
"In this way, the companies, which are determined to have the ability to repay their debts as a result of restructuring their loans or being subjected to a new redemption plan, would be assisted in maintaining their economic activities and arranging their cash flows along with fulfilling their obligations," it is also noted in the announcement.
Although there is no detail about the scope of the debt restructuring, it is claimed that the companies that have credit debt over 100 million Turkish lira [$15,942,539.70] will be allowed to apply for the debt restructuring in the news reported about TBB’s efforts.
The BRSA regulation has paved the way for the restructuring debts of companies having credit debts to banks and other financial institutions by evaluating their solvency.
In the process under the responsibility of the BRSA, it had been planned to take certain "measures" such as extending the maturity of the relevant credit debts, renewing the credits of debtors, providing additional loans for the debtors, and removing a certain part of debts and so on.
WHY ARE THE DEBTS NOT BEING PAID?
A rapid depreciation in Turkish lira has made the private sector in Turkey the greatest risk of the economy. It should also be noted that the private sector has foreign exchange assets of around $300 billion, including a high amount of external debts. Under the current circumstances, many companies have gone bankrupt and the banks in Turkey cannot collect their receivables from these debtor companies suffering from the financial crisis.
It is known that some sectors ─particularly energy sector─ and certain capital investment groups have long been unable to pay their debts. The main problem in terms of both non-financial private sector and the financial sector is the lack of assets and revenues to meet the high foreign currency. The most striking examples of this situation can be seen especially in the energy and financial sectors. The debts of companies, which mostly became indebted with foreign currency but earned income with domestic currency, have been increased so fast due to the boom in foreign currency.
A NEW ‘ISTANBUL APPROACH’ IS ON THE WAY?
Turkish media had reported just before the elections on June 24, 2018, that a process like "Istanbul Approach" implemented after the financial crisis in 2001 was on the agenda of the Turkish government. The amount of debt included in the scope of restructuring in the Istanbul Approach was approximately $6 billion. Yet this time it is expected that the amount of debt to be included in new restructuring plan will exceed $100 billion.
BANKS HAVE COME TO AN AGREEMENT: "BIG CAPITALISTS WILL BE SAVED"
The number of banks to participate in the Framework Agreement is not clear yet. But it is certain that the top 7 banks of Turkey ─ Ziraat Bank [Agricultural Bank of Republic of Turkey], İş Bank, Halkbank, Vakıfbank, Yapı Kredi Bank, Garanti Bank and Akbank ─ will be included in the agreement.
It is stated that the decisions on "financial restructuring" will be taken by a qualified majority of financial institutions which will be in the committee of ‘‘the Framework Agreement’’ in the process of debt restructuring.
For the additional credits, %90 of the lending banks has to accept the application of a company. If all banks accept the debt restructuring application of a company, debts might be wiped off.
HOW WILL THE AUTHORITIES MEET THE COSTS OF DEBT RESTRUCTURING?
There is a vagueness in the Framework Agreement regarding how the banks suffering from renewing their foreign debts (syndication credits) will fulfil the obligations for debt relief, debt cancellation, fresh lending and their needs for new resources.
Moreover, there is no detail about the context of "assessment" or "feasibility studies" that are planned to be used for the reviewing of the applications.
Pointing out that measuring the debt solvency of companies has become more difficult due to increases in foreign currency and other prices, the experts say that an extensive evaluation of both financial constrictions and the shrinking tendency that can be seen in domestic and foreign demands should be carried out, while the future cash flow expectations based on the past performances of companies may not be so realistic and therefore their solvency cannot be correctly determined by the relevant institutions.
Another significant question is how the state or public institutions would play a role in overcoming "the additional costs" of the debt restructuring process especially for the banks in Turkey. If public banks play a more active role in the process, the responsibility of public banks in total debt stock will be likely to increase, as can be seen in the implementation of the Credit Guarantee Fund.
BRSA’s regulations to relief bank balance sheets are also one of the possibilities. Yet in any case, "the burden of bailout operation for big capitalists will be laid on the shoulders of people."