As the experts began to discuss whether the current crisis in Turkey would spread all over Europe through Turkish banking sector, the shares of Banco Bilbao Vizcaya Argentaria (BBVA), a Spanish bank which is the principal shareholder of Turkey’s Garanti Bank, have crashed due to currency crisis and risks in the banking sector in Turkey. Despite this heavy impact of the crisis, Ali Fuat Erbil, who is the General Director of Garanti Bank ─ the country’s second-largest bank by market value ─ claimed that there is no problem in economy and banking sector, saying that "We have so powerful sector"
The shares of BBVA, the principal shareholder of Garanti Bank, have depreciated by approximately 12percent since last Thursday. It is stated that the depreciation of BBVA’s shares results from the currency crisis in Turkey and the risks in the banking sector including Garanti Bank.
'WE ARE NOT ABLE TO UNDERSTAND'
In an interview on a live broadcast in NTV, Erbil said regarding the boom in foreign exchange rates, "We are not able to understand. As a banker, I cannot explain the reason why we are witnessing such a high level of currency today. There is no problem related to the banking sector."
"People is necessarily looking for some other influences at this point of fluctuations. Some dynamics in global order begin to change. Business manners are seriously changing. There are certain things that are told to us regarding financial and economic issues [as theories]. When you wanted to invest in a country, the first thing you should consider is the financial condition of that country. What is the debt of our country? This is very important. Public debt is far below the certain criteria, which is below 30 percent. This is a very low rate."
"The second one is the budget deficit. Turkey’s economy is growing. We have a large number of defence expenditures in recent years. Despite all, Turkey had a deficit of 1,5 percent in the capital budget last year. These are far below even the admissible figures. The second one is the banking sector. The banking sector in Turkey has changed so much. We have a very strong sector; our profitability is quite good and there is no problem with the banking sector," Erbil also noted.
'‘BANKS TO CREATE A LIQUIDITY OF $100 MILLION'
Claiming that the period of normalization has been entered, Erbil stated, "The total liquidity to be created by the banks is approximately $100 million at the moment. Half of these are already assets of customers operated abroad. We had witnessed much worse than the today’s current account deficit; so we are now at the half of it. The current account deficit will decrease. The level of currencies has risen, so this will necessary reduce the current account deficit."
'WE, AS BANKERS, DO NOT LIKE HIGH INTERESTS'
"I cannot say that this fire has been extinguished. I think we excessively have necessary instruments [to suppress the ‘fire’]. As of now, there is nothing else to be done. We, as the bankers, do not like high interest rate; it causes a loss to us. These steps taken by the Central Bank of Turkey are quite rational," Erbil said.
SHARES OF BBVA DEPRECIATED BY ALMOST 12 PERCENT WITHIN 5 DAYS
BBVA, the principal shareholder of Turkey’s Garanti Bank, is the most risk-bearing financial institution among the creditors of the Turkish banking system. It seems that the shares of European banks ─ especially the creditors of the banking system ─ are also depreciating due to the currency crisis in Turkey and the risks in the banking sector since last Thursday.
In this context, the share value of BBVA has depreciated by approximately 12 percent within five days. According to calculations, BBVA’s share in Turkey’s foreign debt is above 35 percent.
Spanish BBVA has become one of the most depreciated European banks due to negative developments in Turkey.
BBVA controls 49,9 percent of Garanti Bank after raising its stake in February last year. Having a book value of €4.4 billion for BBVA, Garanti Bank had $84 billion in assets as of June 30th.