ANTALYA - Central banks worldwide, including Turkey, are cutting interest rates dramatically, but the leaders in the finance sector still choose to employ a 'wait and see' approach, according to Isbank's Ersin Özince.
While the Central Bank's recent decision to cut interest rates caused optimism in the market, finance sector leaders have adopted a "wait and see" approach. Ersin Özince, board chairman of the Banks Association of Turkey, said the effects of the interest rate cut were still not clear.
The Central Bank would utilize the interest tool as is required, Özince, who is also the chief executive of Isbank, said Tuesday in a meeting in Antalya.
"On the other hand, while interest rates are being cut all over the world, it is still not clear to what extent this would reflect on the credit costs," he said.
"Albeit the decline in interest rates, the sources are very limited. So there is no need for early optimism," Özince told journalists.
"If people hold their deposits in the banks for longer terms and if longer-term foreign sources are provided, then the cheaper interest rates could be something useful for Turkey's source transfer system. But the cut in interest rates is something good anyway, because the real interests are already quite high," said Özince. "The Central Bank would evaluate the opportunities for cutting the rates," Özince added.
Responding to a question on what extent the economy would be affected in the case of the Central Bank pulling interest rates to zero, Özince said this "would be a disaster."
Subjective terms
Commenting on the debate on whether Turkey's banking system is experiencing difficulties due to the global financial turmoil, Özince said the Central Bank was the one who could better respond to this question.
"In the event the real economy was squeezed, banks would definitely be affected on a certain level. But it is not a matter of a discussion that can be conducted with subjective terms," said Özince. "If there is a difficulty, those who are experiencing this should strive to remove it. At Isbank, it is not our concern. We do not have any problems in our operations."
Turkey has the ability to overcome both real economy turmoil and a banking turmoil, said Özince. "The reason for this is the fact that there is a serious and considerable potential...because we do not need to invent virtual economic tools, which caused the crisis in the developed economies, we have the ability to find exits from the crisis, just like we found them following the 2001 crisis," said Özince. "Moreover, we are not facing such a destructive one this time," he added.
Recalling his earlier statement that Turkey had a shallow capital market, Özince said both Turkey's capital and monetary markets were shallow. "Bankers can compare the figures of their own sector with the smallest economies of Europe, such as Greece," he said.
"As long as Turkey's finance sector is not developed, it is impossible to attain a bigger economy, better employment and higher production rates. You cannot consider foreign capital a useful tool unless that foreign capital does not have a monetary and capital market to move within," Özince said.