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Fitch downgrades 14 Turkish banks’ rating

U.S. credit agency Fitch downgraded 14 Turkish banks’ credit score to negative. According to the Fitch statement listed 12 private banks, Turk Eximbank and Development and Investment Bank of Turkey’s credit rate were lowered.

The credit agency also has downgraded Turkey’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to “BB-” from “BB” with a Negative Outlook on 12th July.

“The dismissal of the central bank governor Murat Cetinkaya heightens doubts over the authorities’ tolerance for a period of sustained below-trend growth and disinflation that Fitch considers consistent with rebalancing and stabilization of the economy. It also highlights a deterioration in institutional independence and economic policy coherence and credibility.

Fitch criticized the Turkish government for interfering central bank’s decisions.

“The downgrades of the foreign-owned Turkish banks’ LTFC IDRs to ‘B+’ from ‘BB-‘ reflects an increased risk of government intervention in the banking sector in case of a marked deterioration in Turkey’s external finances,” Fitch commented.

“We continue to view the risk of intervention that would prevent banks from servicing their [foreign currency] obligations to be slightly higher than that of a sovereign default, and this result in these ratings being capped one notch below the sovereign LTFC IDR.” New York-based rating agency explained the concern about the Turkish economy.

Reuters reported that Turkey’s economy is expected to contract in 2019 for the first time in a decade and to see only modest growth in the following two years.

The Turkish lira lost its almost 50 percent values since last August as Turkey and U.S. have tension over the Russian S-400 air defense missile system. Turkish economy contracted 2.6% in the first three months of the year compared to the previous period last year due to shrinking domestic demand and decreasing investment expenditures, and 3% decline in the last quarter of 2018, pro-government DailySabah shared data.

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