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Troubled Credits Selling of State Banks to Asset Management Companies in Turkey

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Global Approaches in Financial Economics, Banking, and Finance

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Abstract

Turkish Banking Sector has grown substantially in recent years. Turkish Banking Sector’s total asset size of sector has reached TL 2972 billion, and total credit size has reached TL 1919 billion as of 2017 June. On the other hand, an increment is being seen in the troubled credits with credit growth. Total troubled asset size has reached TL 61 billion as of 2017 June.

Banks try to dispose troubled credits in their balance sheet. In this context, one of the options that banks carry out is to sell of troubled credits to asset management companies. When examining practices in Turkey, it can be seen that private banks have been using this option. However, state banks cannot be able to use the option because of regulation absence. Banking Regulation and Supervision Agency issued a charter to make up the deficiency about state banks’ troubled credit selling to asset management companies on 08.11.2017. Hence, state banks can transfer and benefit from troubled credit selling to asset management companies.

This paper was prepared to make an evaluation about the charter and its probable effects. As a result of study, it was determined that state banks need to be able to sell credit to asset management companies because their rivals who are private banks have such an opportunity. So, in order to be able to compete with private banks, the regulation is really a need for state banks. Also, state banks’ various indicators which are asset quality, profitability, growth, and industry share would be improved by means of the regulation. On the other hand, troubled credits selling of state banks to asset management companies in Turkey may cause reputation risk for state banks because of collection processes and practices of asset management companies.

In general, it can be said that new regulation proposed by Banking Regulation and Supervision Agency would be beneficial to state banks. Taken into consideration that troubled asset size in state banks has reached TL 17 billion as of 2017 March, importance and benefits of new regulation can be understood very well. However, it would be the best that effects of new regulation should be followed up strictly by regulatory authorities specifically Banking and Regulation Supervision Agency. Necessary amendments should be made if negative effects were seen.

This paper is the first academic study handling the subject which is about Banking Regulation and Supervision Agency’s charter for state banks’ troubled credit selling to asset management companies.

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Author information

Authors and Affiliations

  1. Borsa İstanbul, Istanbul, Turkey

    Mustafa Tevfik Kartal

Authors
  1. Mustafa Tevfik Kartal
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Editor information

Editors and Affiliations

  1. Istanbul Medipol University, Istanbul, Turkey

    Hasan Dincer

  2. Istanbul Medipol University, Istanbul, Turkey

    Ümit Hacioglu

  3. Istanbul Medipol University , Istanbul, Turkey

    Serhat Yüksel

Appendices

Appendices

Appendix 1 Credit volume of state banks in Turkey (TL 1000)

Bank name

2010/12

2011/12

2012/12

2013/12

2014/12

2015/12

2016/12

2017/3

T.C. Ziraat Bankası A.Ş.

57,161,350

71,173,260

70,630,294

110,253,435

141,129,911

185,942,859

232,392,086

251,674,445

Türkiye Halk Bankası A.Ş.

44,003,264

55,949,446

65,550,830

84,413,441

100,481,286

125,799,124

157,178,296

167,130,112

Türkiye Vakıflar Bankası T.A.O.

44,836,394

57,200,610

67,867,645

86,496,223

104,343,442

122,974,478

146,618,992

153,167,750

Türkiye İhracat Kredi Bankası A.Ş.

4,159,138

8,065,619

13,352,060

23,035,036

31,889,864

43,156,126

61,520,461

60,676,959

İller Bankası A.Ş.

6,669,608

7,784,913

8,949,749

11,358,967

11,477,528

12,884,980

16,227,751

16,982,158

İstanbul Takas ve Saklama Bankası A.Ş.

19,054

81,405

107,306

282,291

169,177

172,112

98,945

106,776

Türkiye Kalkınma Bankası A.Ş.

1,150,719

1,810,877

2,206,391

2,678,219

3,084,018

3,851,709

5,349,989

5,922,287

Ziraat Katılım Bankası A.Ş.

–

–

–

–

–

1,690,106

5,557,942

6,504,876

Vakıf Katılım Bankası A.Ş.

–

–

–

–

–

–

2,946,447

3,722,522

Total (Deposit)

146,001,008

184,323,316

204,048,769

281,163,099

345,954,639

434,716,461

536,189,374

571,972,307

Total (development and investment)

11,998,519

17,742,814

24,615,506

37,354,513

46,620,587

60,064,927

83,197,146

83,688,180

Total (participation)

–

–

–

–

–

1,690,106

8,504,389

10,227,398

Grand total

157,999527

202,066130

228,664275

318,517612

392,575226

496,471494

627,890909

665,887885

  1. Source: Deposit and development and investment banks’ data were obtained from Turkish Banking Association. Participation banks’ data were obtained from banks’ own web sites

Appendix 2 Troubled credits of state banks in Turkey (TL 1000)

Bank name

2010/12

2011/12

2012/12

2013/12

2014/12

2015/12

2016/12

2017/3

T.C. Ziraat Bankası A.Ş.

855,070

863,041

2,057,553

2,417,441

2,716,920

3,140,524

4,217,097

4,331,998

Türkiye Halk Bankası A.Ş.

1,757,753

1,668,695

1,959,646

2,245,176

3,699,661

3,973,738

5,140,082

5,570,837

Türkiye Vakıflar Bankası T.A.O.

2,265,716

2,156,879

2,724,963

3,531,427

3,974,372

4,850,213

6,413,503

6,728,333

Türkiye İhracat Kredi Bankası A.Ş.

120,766

114,853

112,383

117,478

127,478

131,688

233,087

266,012

İller Bankası A.Ş.

461

466

563

563

562

556

555

555

İstanbul Takas ve Saklama Bankası A.Ş.

1637

1637

1637

1637

1637

1574

1574

1574

Türkiye Kalkınma Bankası A.Ş.

78,337

94,664

97,220

124,907

109,033

107,471

125,779

124,405

Ziraat Katılım Bankası A.Ş.

–

–

–

–

–

2

10,483

19,602

Vakıf Katılım Bankası A.Ş.

–

–

–

–

–

–

3647

9646

Total (deposit)

4,878,539

4,688,615

6,742,162

8,194,044

10,390,953

11,964,475

15,770,682

16,631,168

Total (development and investment)

201,201

211,620

211,803

244,585

238,710

241,289

360,995

392,546

Total (participation)

–

–

–

–

–

2

14,130

29,248

Grand total

5,079,740

4,900,235

6,953,965

8,438,629

10,629,663

12,205,766

16,145,807

17,052,962

  1. Source: Deposit and development and investment banks’ data were obtained from Turkish Banking Association. Participation banks’ data were obtained from banks’ own web sites.

Appendix 3 Troubled credit/total credit ratios of state banks

Bank name

2010/12

2011/12

2012/12

2013/12

2014/12

2015/12

2016/12

2017/3

T.C. Ziraat Bankası A.Ş.

1.50%

1.21%

2.91%

2.19%

1.93%

1.69%

1.81%

1.72%

Türkiye Halk Bankası A.Ş.

3.99%

2.98%

2.99%

2.66%

3.68%

3.16%

3.27%

3.33%

Türkiye Vakıflar Bankası T.A.O.

5.05%

3.77%

4.02%

4.08%

3.81%

3.94%

4.37%

4.39%

Türkiye İhracat Kredi Bankası A.Ş.

2.90%

1.42%

0.84%

0.51%

0.40%

0.31%

0.38%

0.44%

İller Bankası A.Ş.

0.01%

0.01%

0.01%

0.00%

0.00%

0.00%

0.00%

0.00%

İstanbul Takas ve Saklama Bankası A.Ş.

8.59%

2.01%

1.53%

0.58%

0.97%

0.91%

1.59%

1.47%

Türkiye Kalkınma Bankası A.Ş.

6.81%

5.23%

4.41%

4.66%

3.54%

2.79%

2.35%

2.10%

Ziraat Katılım Bankası A.Ş.

–

–

–

–

–

0.00%

0.19%

0.30%

Vakıf Katılım Bankası A.Ş.

–

–

–

–

–

–

0.12%

0.26%

  1. Source: Derived from Appendix 1 and 2

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Kartal, M.T. (2018). Troubled Credits Selling of State Banks to Asset Management Companies in Turkey. In: Dincer, H., Hacioglu, Ü., Yüksel, S. (eds) Global Approaches in Financial Economics, Banking, and Finance. Contributions to Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-78494-6_12

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