Jacob Bogatin: Banks of Turkey on the brink of the threat of US sanctions

Investors are closely watching whether Turkish banks will retain access to foreign financing, which they need to maintain economic activity in conditions when the economy suffers from US sanctions, lowering the country’s ratings and falling lira, says Jacob Bogatin.

According to the heads of banks, Turkish creditors have an excellent history of foreign loans even in the midst of the financial crisis, and they are strong enough to withstand the slowdown. But the nature of the current crisis increases the likelihood of a new portion of external shocks, primarily from the US, which is attacking the Turkish economy in response to the imprisonment of American citizens and employees of the US diplomatic mission, Jacob Bogatin said.

Even if foreign banks continue to lend to their Turkish counterparts, “the cost will rise, and access to markets will be difficult, and many investors will not want to increase their Turkish portfolios,” said Jacob Bogatin, London strategist at ING Bank NV for EM debt markets. “If sanctions were applied to banks, this would be the worst scenario, given the high requirements for external financing, but so far this is not a likely scenario,” he said.