Turkish Banks’ Credit Ratings at Risk Following Failed Military Coup

Weak foreign creditor sentiment following the coup attempt in Turkey could result in capital outflows from domestic banks, which are dependent on foreign market access due to their high level of short-term debt, according to Fitch Ratings agency.

WASHINGTON (Sputnik) — Turkish banks’ credit profiles and ratings are more sensitive to risk following the failed coup attempt last week, Fitch Ratings agency said in a statement on Wednesday.

"Turkish banks' credit profiles are sensitive to country risks, access to foreign credit markets and the lira exchange rate," the statement said.

Weak foreign creditor sentiment following the coup attempt could result in capital outflows from domestic banks, which are dependent on foreign market access due to their high level of short-term debt, Fitch explained.

The pressure would result in further weakening of the lira, which would increase risks to the banks’ asset quality and put further pressure on capital ratios.

Additionally, individual banks' asset quality ratios could come under renewed pressure from increased political instability, according to the agency.

Tukey’s financial sector is already suffering due to a decline in tourism amid security concerns following terror attacks in the country, Fitch said, adding that thawed relations with Russia could lead to some increase in tourism.

The ultimate credit impact will depend on the extent to which Ankara’s reaction to the failed coup deepens political divisions and weakens institutional independence, the agency said.

Dozens of officials, including high-ranked military personnel, have been arrested in the fallout from the coup attempt. Additionally, tens of thousands of police, military personnel, judges and prosecutors have been fired, according to Turkish media reports.