The regulator of the banking sector in Turkey has advised commercial banks not to distribute returns from profits in 2021, after the collapse of Turkish lira eroding banks’ cash stocks, people with direct knowledge of the matter said.
The regulator, known as BDDK, has passed its recommendation to banks through the Turkish Banking Association, but has yet to send a written fee notice prohibiting dividend payments, according to the people, who asked not to be named due to the sensitivity of the matter. BKDK and the Association of Banks declined to comment.
Banks were allowed to pay 10% of their net profit last year thanks to successful risk management during the pandemic.
Read also: Turkey seeks to issue bonds to compensate for banks’ losses from the decline in the lira
Despite accelerating inflation, the central bank has begun a violent cycle of interest rate cuts, eroding confidence in the lira and making the currency the worst performer in emerging markets last year with its decline of more than 40% against the dollar.
Turkey plans to inject 51.5 billion lira ($3.8 billion) into state banks in order to reduce the impact of the weak lira on state banks.