BRSA Chair Kavcıoğlu: Commercial loans should be extended by prioritizing firms that focus on investment, employment, and exports

Banking Regulation and Supervision Agency (BRSA) Chair Şahap Kavcıoğlu stated that they expect commercial loans to be extended more selectively in a way that prioritizes firms focusing on investment, production, employment, and exports, adding, "We assess that the banking sector's strong balance sheet structure will also reduce risks that may arise regarding asset quality."

Speaking at the 3rd Future of Finance Summit held in Istanbul, Şahap Kavcıoğlu said that the financial sector, particularly the banking sector, is of vital importance in the process of healthy and sustainable economic growth by accelerating capital accumulation and directing the resources it provides to productive areas.

Kavcıoğlu stated that ease of access to financing opportunities is among the issues they prioritize in order to maintain the direct contribution of real sector companies to growth through production, and expressed that non-bank financial institutions, as well as banks which play a leading role in this regard, are acting with the awareness of this role.

Stating that the BRSA has taken the necessary measures to protect depositors and ensure the effective operation of credit channels, Kavcıoğlu said, "We expect commercial loans to be extended more selectively in the coming period, in a way that prioritizes firms focusing on investment, production, employment, and exports. On the other hand, we assess that the banking sector's strong balance sheet structure will also reduce risks that may arise regarding asset quality."

Kavcıoğlu stated, "The non-performing loan ratio, liquidity indicators, foreign currency position, and leverage ratio are at reasonable levels, and the capital adequacy ratio, as of the most recent data period, stands at 18.4 percent, well above the minimum level stipulated by international standards. Equity consisting of high-quality elements has maintained its strength, also due to the regulations implemented by our agency."

Emphasizing that this strong capital structure, fueled by sustainable profitability, is strong enough to protect the sector against possible future shocks, Kavcıoğlu said, "While banking sector loans continue to increase, the non-performing loan ratio, which is an important indicator of asset quality, is at historically low levels of 1.5 percent, well below the European Union average. Furthermore, the higher provisions set aside compared to the European region and many other countries also reduce the possibility of additional losses for banks. Liquidity coverage ratios are well above legal limits."

 "The necessity for the non-bank financial sector to increase its product, resource, and income diversity is clear"

Şahap Kavcıoğlu stated that non-bank financial institutions have a share of 2.6 percent in terms of total assets, 3.9 percent in terms of receivables, and 4.7 percent in terms of equity within the total financial sector, adding, "Although it is not at the point we desire, the sector is open to development and has the potential to be an important actor alongside the banking sector, which meets a significant portion of credit supply and demand in the Turkish financial system."

Stating that non-bank financial institutions have an extremely important role in increasing SMEs' access to finance through the financing channels they provide, he noted the following:

"In this context, the necessity for the non-bank financial sector to increase its product, resource, and income diversity is clear. At this stage, I would like to reiterate here that we will do our part to resolve the difficulties our non-bank financial institutions face in practice, to enable them to reach a certain volume in a competitive environment without creating systemic risk, and to increase their share within the financial system. On the other hand, our regulatory compliance audits regarding savings finance companies, which have been subject to our agency's supervision since 2021, are ongoing, and we will soon implement the legislative work we have prepared to conduct said activities on healthier and more solid foundations. Additionally, the legislative work we have prepared to further institutionalize the activities of asset management companies and to prevent situations to the detriment of financial consumers has reached the final stage."