Calis Beach and Fethiye Turkey Discussion Forum
Information and Services in Turkey Section => Banks, Interest, Money Transfers, Insurance => Topic started by: JohnF on January 25, 2017, 02:18:01 AM
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I kinda swithered about this post - mainly because I'd hate to be considered as a scaremonger but thought hey ho - its my personal opinion so take heed or not. Your choice.
Over the past couple of months almost everyone I know in Istanbul has either spread their cash deposits over several banks or removed it from Turkey completely. I'm talking about lira accounts, not hard currencies. On the basis that the clever feckers all seemed to be getting their dosh out of Turkey, I got a bit curious about the bank guarantees within Turkey - so did a wee bit of research to see how your money was actually protected.
The TMSF (the folks who guarantee your money) was established in 1933 and over the years the initial guidelines have been altered to take into account prevailing conditions in respect of deposits, interest rates and the overall financial situation in Turkey. I've been trying recently to get an approximate figure for funds currently on deposit (in lira), i.e. the TMSF's exposure in the event of a major currency crisis and failed miserably. However, what I did find out is that the TMSF actually operate an insurance scheme, not a solid guarantee like the Bank of England, in respect of your funds held by banks etc. If things did go tits up, what you'll actually get back is potentially a proportion of your funds that the TMSF can meet, and as for the balance, all you will be is a preferential creditor.
Kinda reminds me of D.A.S.K. :)
Eventually I had a conversation with someone who knows how the scheme works, and they conceded that if the sh1t really did hit the fan then the resources available to the TMSF could be stretched.
Scary or what.
On the basis that I have 716.33TL left in my Finans account, and my OH has about 2,000TL left in her Garanti account - personally, our exposure amounts to virtually zero. I made the call to get our assets out of Turkey about four years ago, and fortunately a few on here believed me when I said get out of lira at that time (beer still on account ;) ). I'm no expert, but if I has substantial funds on deposit in Turkey I'd be having a serious financial review right now.
JF
(your regular forum doom-sayer)
EDIT: changed the bit about TMSF resources as it was speculation, not fact.
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That is very scary.. Ive always felt protected as I assumed when they say you're protected to 100,000 then you really are and have spread money to be sure.
Do you have any inside info as to how much weaker the lira would go before collapse, or what else could cause collapse?
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You a scaremonger John, nooo
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Do you have any inside info as to how much weaker the lira would go before collapse,
Not inside information, but the Lira has dropped 24% since pre-coup and the Turkish Government is still fairly relaxed about it. For comparison, the Pound has lost nearly 16% since pre-referendum and the UK Government is equally relaxed.
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ThanksColwyn..Trouble is will get zero interest in uk.
Turkey just bought 330m of arms from uk. Hopefully theyve got money left... :)
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Phil has always worried about putting any larger amounts in our Turkey Bank Account. We keep it topped up to pay standing orders but would not commit a lot of money to it. The interest is very good and we are always surprised at what we get for a relatively small amount.
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Do you have any inside info as to how much weaker the lira would go before collapse,
Not inside information, but the Lira has dropped 24% since pre-coup and the Turkish Government is still fairly relaxed about it. For comparison, the Pound has lost nearly 16% since pre-referendum and the UK Government is equally relaxed.
Not a good comparison as the Lira has been 'collapsing' for a good few years and its getting weaker and weaker (unlike the £).
Also the UK economy is in far better shape than the Turkish economy.
£ to hit 5tl this week? 4.80 last time I checked.
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Sound advice - thank you.
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Can you see a time John F, when if properties are sold in lire, that the proceeds of sale could be at risk?
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Sound advice and good post John. Myself and Jacqui have three accounts with different banks and similarly to Jacqui Harvey top up as and when needed, never much more than a couple of thousand lira in any of them. We also thought long and hard over many years about whether to buy or rent property and came down on the side of renting, mainly to lessen our exposure to market forces but also for the freedom to move easily from one resort to another if we got bored, which, as yet, we aren't :)
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Do you have any inside info as to how much weaker the lira would go before collapse, or what else could cause collapse?
No. As Colwyn said, the lira has lost 24% against the USD since last summer and shows no sign, as yet, of recovering - and as Stoop mentioned, this is not a recent situation, the lira has been losing ground against USD for years. Way back in 2008/9 it kinda strengthened against the quid for a while, but its all been downhill since then.
Who knows where the tipping point will be, if it ever comes to that.
Can you see a time John F, when if properties are sold in lire, that the proceeds of sale could be at risk?
It depends what you mean by "at risk". I think your sale proceeds could be at risk of devaluation if kept in lira due to increased inflation and a poor performing lira, but the simple way to avoid that is to change it straight into a hard currency.
We're fortunate as the price for our place in Karagozler was agreed in sterling - if you sold an apartment in lira, lets say for 200,000tl last week, you'd have got £43,103 in your back pocket - if you did the same transaction today you'd only get £41,666. For someone selling a large villa that'd be a fair chunk of change to lose.
Some economic forecasters are suggesting that inflation will continue to rise, it was 8.53% in December and unemployment is now at a six year high. The central bank appear to be confident that this crisis is temporary, I hope they're correct.
If anyone wants to read a bit more about the TMFS, and how they operate, here is their web site: http://www.tmsf.org.tr/2016.tr?bid=235
JF
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My problem is I changed my money at 2.6...
Eeeeeek
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Phil has always worried about putting any larger amounts in our Turkey Bank Account. We keep it topped up to pay standing orders but would not commit a lot of money to it. The interest is very good and we are always surprised at what we get for a relatively small amount.
I agree with you Jacqui...
Sue and I are actually in the process of selling up due to personal circumstances however, over the last 7 or 8 years have been tempted by the high interest rates available in Turkey.
The issues for us as documented by many others is the volatility of the currency and the uncertanties of guarantees etc..
I guess you pay your money and take your chances, but not for us.
Dave.
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JohnF, sorry to have been vague. When I say "at risk" I am thinking that if the sale was in lire, would the transfer of proceeds go into the seller's lire account in Turkey? Whilst being held there, could there be a risk that if the bank collapses, the proceeds go with it? Or is there a way that the lire could be transferred directly into an account in U.K.
Like you, I sold a couple of years ago and although to a Turkish couple, insisted on payment in sterling and was successful. I understood at the time that this was unusual and would be even more so now that the lire is so weak. I am asking out of curiosity really, and in the hope that it may help others who are possibly considering moving their assets out of Turkey.
I would like to add that I find your posts very informative and useful. :)
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I'll try and qualify my original post - if a bank was in bother, and called in the TMFS before it collapsed, then in theory all your accounts, lira, sterling etc are covered by the guarantee up to the prevailing limit. The problems start to arise if there are multiple failures, think back to the banking crisis in the UK a few years ago - Lloyds TSB, RBS and Bradford & Bingley all basically going tits up and having to be bailed out by the government.
The TMFS fund is finite - it can only pay so much then unless the government bailed it out, you'd get a proportion of your money back. If there was a banking crisis to the extent that multiple banks were failing like the UK in 2008, then the question is could the government afford to bail them out?
This is why I made the comparison with the D.A.S.K. scheme - its funds too are finite.
I don't think we're anywhere near that point just now, the retail banking sector in Turkey is an attractive investment for foreign companies. Finans is now owned by the National Bank of Qatar and Garanti is 40% owned by BBVA, one of the largest financial institutions in Spain. Akbank is owned by the Sabancı family who probably have enough dosh to buy Turkey if they wanted.
So, I suppose the answer to your question is no, its not at risk currently. But that could change. Who knows.
JF
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Bailed out of the lira a couple of years ago. We took a hit but it would be far worse if we were doing it now...
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We waited as did a lot of others for the lira to drop until about 4 years ago when we decided to get out...We too took a big hit but I shudder to think how much we would have lost now..
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I don't think we're anywhere near that point just now, the retail banking sector in Turkey is an attractive investment for foreign companies. Finans is now owned by the National Bank of Qatar and Garanti is 40% owned by BBVA, one of the largest financial institutions in Spain. Akbank is owned by the Sabancı family who probably have enough dosh to buy Turkey if they wanted.
So, I suppose the answer to your question is no, its not at risk currently. But that could change. Who knows.
And change it has...
Several Turkish banks have had their ratings downgraded by S&P, Moodies and Fitch, three of the major credit agencies.
Fitch banks: http://www.reuters.com/article/idUSFit988563 (http://www.reuters.com/article/idUSFit988563)
S&P banks: http://bianet.org/english/world/183206-s-p-downgrades-credit-rating-of-4-banks-in-turkey-after-revising-turkey-s-rating-to-negative (http://bianet.org/english/world/183206-s-p-downgrades-credit-rating-of-4-banks-in-turkey-after-revising-turkey-s-rating-to-negative)
Moodies: https://www.moodys.com/research/Moodys-Reviews-for-Downgrade-the-Ratings-of-17-Turkish-Banks--PR_352342 (https://www.moodys.com/research/Moodys-Reviews-for-Downgrade-the-Ratings-of-17-Turkish-Banks--PR_352342)
Pretty much every high street bank has taken a wallop on their standings. But before anyone rushes out to fill their mattress with lira, these downgrades appear to have come on the back of Turkey as a country being downgraded to junk status as far as the agencies are concerned. The apparent inability to control rising inflation and the poor performance of the lira I suspect also played a factor here.
JF
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Thanks for keeping us updated. :)
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As for myself lived in Turkey 9 years now, bank interest has paid for my
Lovely life here and wouldnt change to go back to the uk.
The interest rate still 11% in the bank so quite happy.it pays my rent
And bills and the lovely sunny days and many friends here make it
Worth staying. ...enjoying retirement
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The problem will start Davey if Reg eventually gets his own way and reduces the interest rates.. It is his prime target and never stops banging on about it..
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I know that I am a thickey twitty re not understanding all of this about the tl I have just read the links posted by John F and stll dont get it could someone simplfy for this tt please what this downgrading means, I am getting a tad concerned about the tl we have in our bank account...many thanks as always for any advice :)
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Found this on the internet.
Who are the credit rating agencies and what did they just do?
There are three primary national credit rating agencies: Fitch, Moody’s Investors Service (“Moody’s”), and Standard and Poor’s (“S&P”). These agencies rate the creditworthiness of governments, companies and individual securities, allowing investors to better understand the risk of their investments. The higher the rating, the more creditworthy — or, alternatively, the less risky — the investment.
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could someone simpllfy for this tt please what this downgrading means
There are two issues to consider: what are the chances of my bank going bust; and what happens to my money if it does. On the first question the three ratings agencies agree that Turkish banks are risky and getting riskier. This is just advice to investors that they may act upon or ignore as the they see fit. As to the second question JohnF is pointing to weaknesses in the arrangements for protecting depositors' savings. We have been through this in the UK in 2007 and 2008. People may have forgotten (I hope I am remembering correctly) that when the banking crisis hit the UK there was quite limited protection for our savings. Only the first £2000 was 100% covered and a further £33,000 was 90% covered. This meant that the maximum payout for people with their life savings in a single bank account would have been £31,700 no matter how much they had in the bank. So if you had a £100,000 retirement pot ... tough, you've now got only £31,700. That was before the much reviled Gordon Brown stepped in to raise the protection to £50,000 at 100%. So UK Gov bailed out British savers. Will the Turkish Gov do the same, do you think?
For those banking in the UK the amount of protection is now £85,000 (it went up on 30 Jan 2017) so, to be safe, don't have more than that with any one bank.
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Thank you both for replies I get it now! That is interesting to know the Uk has gone back up to 85k i did not realise as it went down to 75 last January or may even have been the year before...we do have quite a bit of money in a Turkish account we invested it before all the madness re a lot of things Turkish went crazy, it was for our retirement ( hopefully this May for hubby) so that we could kind of live off the interest when we spend long periods out there, we worked out if we were careful and didnt live a holiday lifestyle it would pay towards our Turkey time, im in a bit of a dilemma now as to what to do....
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im in a bit of a dilemma now as to what to do....
Have you considered Stocks & Shares ISAs?
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Well put Colwyn (your explanation of ratings).
In a nutshell, the ratings agencies are saying that the current financial issues affecting the economy as a whole are now affecting the banks and from an investment perspective, its becoming riskier. Its worth remembering though, that this is from an investment perspective, not day to day usage for savings and current accounts.
That said, there's always been an element of risk investing in Turkey, even for the man in the street - thinking back a few years I can remember when thirty odd percent was available at most banks, and for a good while rates were in the mid twenties. Returns like that do not come without an element of risk else everybody would have been chucking their money into lira at the time.
Take it back a bit further and my OH could get in the region of eighty percent on her account if she'd wanted to - only problem there was that inflation was hitting one hundred odd percent!
The early days of the AKP at least brought a certain level of financial stability that gradually brought rates down and investment started flooding into Turkey. Most of the big money deals the law firm I work for did during the mid to late 2000's and the early part of this decade were from foreign investors. Fast forward to 2017 and a lot of the tier one law firms are shedding staff...
we do have quite a bit of money in a Turkish account we invested it before all the madness re a lot of things Turkish went crazy...
...im in a bit of a dilemma now as to what to do
Not a nice dilemma unfortunately and the only person who can decide is you - what I would say though, is to make sure your money is spread about over different banks. The maximum payout under the TMSF scheme is 100,000tl per person, per institution. £22,000 or thereabouts.
One thing I did read recently, in respect of the TMSF, is that all the seized businesses ($9 billion worth) are now under the control of the TMSF. That makes a handy wee cash buffer for the time being...
JF
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And in a nice touch of irony the deputy head of TMSF, the organization that runs seized Gulenist companies, was himself sacked in January as a suspected Gulenist.
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Do you mean stocks and shares ISAS in Turkey or Uk Colwyn? We do have an isa each in uk.
Thank you for very much Colwyn and John H for the posts I really appreciate it ha we dont have 100.000tl not that much sadly lol but that has reassurred me a lot if worst case scenario their were probs with banks we should be ok! I think for now im gonna stick with it in tl as we would lose out a lot if we were to change it back to sterling and hopefully from May we will be spending more time in Turkey so it will be getting used! :) wow 80% seems unbelivable we met folk in our early days of going to Turkey who had gotten 30% and said this enabled them to live a very nice life style...
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What do ISAS and the stock markets guarantee you in the UK?Colwyn.
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Karennina, I meant ISA Stocks & Shares in UK.
Davybill, ISA S&Ss are protected to investment funds going broke to £50,000 per fund. There are no guarantees about stock markets at all - as I'm sure you know. Are they more or less risky than Turkish banks? Make your guess. But with US markets giving 26% return per annum it is less than 4 years to get your original stake back if you take the extra out each year - which I do.
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Reg does not seem to be a big fan of the recent Credit Agency downgrading either..
http://www.hurriyetdailynews.com/erdogan-blasts-credit-rating-agencies-what-is-the-referendum-to-you.aspx?pageID=238&nID=109452&NewsCatID=344
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Ooooh, he's holding up his finger. There's someone else who does that!
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Perhaps it's the sign of a secret cult!
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I don't think we're anywhere near that point just now, the retail banking sector in Turkey is an attractive investment for foreign companies. Finans is now owned by the National Bank of Qatar and Garanti is 40% owned by BBVA, one of the largest financial institutions in Spain. Akbank is owned by the Sabancı family who probably have enough dosh to buy Turkey if they wanted.
Well, I know their credit ratings were downgraded but it looks like I was right about the banks still being attractive to foreign investors. Garanti and Halk bank shares were the leading way, $150m and $90m respectively traded on the Borsa to foreigners last month. Turkish airlines weren't far behind, $86m traded since turn of the year.
The weak lira has a lot to do with this, but even so its good to inward investment rising again.
JF
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As further confirmation that Turkish banks are looking good for foreign investment, in the past few days BBVA (second largest bank in Spain) just ploughed another 3.32Bn lira into Garanti taking their stake in the bank to just under 50%.
Good news all round I reckon.
JF
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I know i am a bit of a thicky twitty re financial matters am i classed as a foreighn investor? This does sound like good news :)
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am i classed as a foreighn investor? This does sound like good news :)
Definitely a bull rather than a bear.
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am i classed as a foreighn investor?
No, unless of course you've got a few million dollars stuffed under your mattress and fancy owning a chunk of a Turkish bank :)
JF
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Oh ha no i dont have so my little retirement sum in a Turkish bank does not count to this! Colwyn as it happens I am a Taurus ;) :) :D
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Looks like Moody's aren't too impressed with the way things are going in Turkey right now. They've downgraded their ratings for fourteen Turkish banks from stable to negative and released this statement:
“Economic prospects have worsened significantly since Moody’s last rating action on Turkish banks in September 2016 and the rating agency expects this will negatively affect the banks’ asset quality, earnings generation and capital and may lead to heightened foreign currency refinancing risk,”
The banks affected are Akbank, Alternatifbank, HSBC Turkey, ING Turkey, Finansbank, Ziraat Bank, Halk Bank, Vakiflar Bank, Turk Ekonomi Bankası, Garanti Bank, Yapı Kredi Bank, iş Bank, TSKB and the GRI Export Credit Bank of Turkey.
There's a bit more in this HDN (http://www.hurriyetdailynews.com/moodys-revises-outlook-of-14-turkish-banks-to-negative.aspx?pageID=238&nID=111060&NewsCatID=344) article, one significant paragraph being:
On March 20, Moody’s said its decision to affirm and change the outlook from stable to negative on the long-term deposit and debt ratings of 14 banks reflects Moody’s expectation that these banks’ ratings would come under pressure from a combination of the weakening capacity of the government of Turkey to provide support in case of need, as implied by the negative outlook on the sovereign rating; and the increasingly adverse macroeconomic environment in Turkey.
Make of it what you will...
JF
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Yep, and there are a few more interesting articles in today's HDN. trade wars with Russia, implied threats to Europeans,
denial of Referendum cancellation, ect
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That old chestnut of "living in interesting times" is very fitting right now when applied to Turkey.
I've just been offered a contract in Serbia, kinda looks like butlins compared to Turkey right now :)
JF
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"We, as Turkey, call on Europe (http://www.hurriyetdailynews.com/tag/Europe) to respect human rights and democracy." (R.T. Erdogan, 22 March 2017). Perhaps I should have forwarded this to Mary62 for her jokes section.