September 19, 2019 / 12:34 PM / 2 months ago

UPDATE 1-Turkey's big banks consider launching AMC for bad debt -sources

(Adds detail and context)

By Ebru Tuncay and Jonathan Spicer

ISTANBUL, Sept 19 (Reuters) - Turkey’s leading banks have discussed creating an asset management company (AMC) to house their higher-quality non-performing loans (NPLs) as a possible solution to the country’s bad-debt problem, said two people familiar with the talks.

State and private banks discussed the idea before the BDDK banking watchdog’s announcement on Tuesday that lenders must convert 46 billion lira ($8.1 billion) in loans to NPLs and provision for losses by the end of the year.

The sources, a senior banker and a bank adviser who both requested anonymity, said talks are ongoing. An AMC is a possible alternative to an effort to establish a fund-of-funds to hold tens of billions of dollars of bad construction and energy sector debt, they said.

The fund-of-funds effort, which had ben proposed by Treasury Minister Berat Albayrak, stalled over the spring and summer as bankers shelved or dismissed initial plans, Reuters reported in July.

It would take time to establish an AMC and no final decisions have been made, the sources said.

The adviser said the idea was to transfer to the AMC non-performing loans that were “not hopeless” and could yet pay out, adding that lawyers had been consulted about the idea.

Turkish companies, mostly in the construction and energy sectors, have struggled to service bad debt lingering on banks’ balance sheets, which represents one of the worst hangovers from last year’s currency crisis.

The crisis sliced nearly 30% off the Turkish lira, ended years of a construction-driven boom fueled by cheap foreign credit and sent inflation and interest rates soaring as the $766 billion economy slipped into a recession that has stretched into 2019. ($1 = 5.7030 liras) (Reporting by Ebru Tuncay and Jonathan Spicer Editing by Dominic Evans and David Goodman)

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