Turkey is pushing commercial lenders to slash interest rates charged on loans to companies after the central bank moved this week to stimulate the economy with a surprise rate cut.
The monetary authority on Saturday released rules that will force banks to bring commercial loan rates closer to Turkey’s benchmark policy rate, in an attempt to counter signs the $800 billion economy might be slowing.
The regulations follow the central bank’s decision on Thursday to cut its policy rate to 13 per cent, even with inflation running at a 24-year high of 80 per cent.
The intended objective is to keep relatively cheaper cash flowing to companies and generate jobs as Turkey gears up for elections in 2023.
Banks will also need to carry more lira-denominated government bonds to adjust, a requirement that may prompt a rally in Turkish debt markets like the one that followed similar measures in June.
The monetary authority said the regulations will strengthen the so-called transmission mechanism, or its ability to influence the cost of money that banks lend to their customers.
But the bulk of the changes are aimed at lowering the cost of loans for corporate customers.
Lenders that charge too much or lend too aggressively will be required to park a larger amount of lira assets at the central bank.
Lenders asking for interest rates of 22.85 per cent to 29.4 per cent on new commercial loans will be required to lock lira bonds worth 20 per cent of new credit at the monetary authority. For even higher interest rates, the ratio rises to 90 per cent.
The new regulations apply to loans that will be extended through the end of the year, and the rates band will remain linked to the official policy rate.
There’s been a sharp divergence between Turkey’s official policy rate and the cost of loans in the banking sector in recent months.
Lenders now charge more than double the central bank’s rate, which had been held at 14 per cent since December until Thursday’s cut.
The average rate for commercial loans in liras spiked to 30 per cent in July, the highest in four years. While it’s fallen slightly amid complaints from businesses about a finance crunch, it was still at 27 per cent as of August 12, according to official data.
Boosting the economy through credit is a policy long favoured by President Recep Tayyip Erdogan’s administrations.
Following an attempted coup in 2016, Turkey’s government introduced the Credit Guarantee Fund, through which companies could access borrowing backed by the state.
The approach eventually backfired as abundant credit caused the economy to overheat and contributed to the lira’s crash in August 2018.
More recently, juiced by the president’s favoured ultra-loose monetary policy, Turkey’s economy has blazed ahead as it emerges from the Covid-19 pandemic, and has continued to expand at one of the fastest rates in the Group of 20.
But the central bank this week warned of “some loss of momentum in economic activity” at the start of the third quarter.
The abrupt resumption of monetary easing puts the lira, one of the world’s worst-performing currencies this year, at risk.
The currency weakened as much as 1 per cent against the US dollar after the rate decision, reaching its lowest since December 20, before paring losses.
Turkey’s policy makers are following through on Mr Erdogan’s determination to lower borrowing costs as much as possible before elections scheduled for June.
But price increases are emerging as a major threat to the Turkish leader’s popularity, and the new regulations hardly make a compelling argument that monetary authority sees inflation as its number one priority.
Forcing banks to lend at lower rates accentuates overheating concerns and will not only do nothing to address inflation but will also make it worse, said Tim Ash, emerging markets strategist at BlueBay Asset Management.
UK-EU trade at a glance
EU fishing vessels guaranteed access to UK waters for 12 years
Co-operation on security initiatives and procurement of defence products
Youth experience scheme to work, study or volunteer in UK and EU countries
Smoother border management with use of e-gates
Cutting red tape on import and export of food
Kill%20Bill%20Volume%201
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SPECS
%3Cp%3E%3Cstrong%3EEngine%3A%20%3C%2Fstrong%3E2-litre%204-cylinder%20petrol%20(V%20Class)%3B%20electric%20motor%20with%2060kW%20or%2090kW%20powerpack%20(EQV)%0D%3Cbr%3E%3Cstrong%3EPower%3A%3C%2Fstrong%3E%20233hp%20(V%20Class%2C%20best%20option)%3B%20204hp%20(EQV%2C%20best%20option)%0D%3Cbr%3E%3Cstrong%3ETorque%3A%3C%2Fstrong%3E%20350Nm%20(V%20Class%2C%20best%20option)%3B%20TBA%20(EQV)%0D%3Cbr%3E%3Cstrong%3EOn%20sale%3A%20%3C%2Fstrong%3EMid-2024%0D%3Cbr%3E%3Cstrong%3EPrice%3A%20%3C%2Fstrong%3ETBA%0D%3C%2Fp%3E%0A
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'Top Gun: Maverick'
Rating: 4/5
Directed by: Joseph Kosinski
Starring: Tom Cruise, Val Kilmer, Jennifer Connelly, Jon Hamm, Miles Teller, Glen Powell, Ed Harris
Destroyer
Director: Karyn Kusama
Cast: Nicole Kidman, Toby Kebbell, Sebastian Stan
Rating: 3/5
UAE release: January 31
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Tearful appearance
Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday.
Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow.
She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.
A spokesman said her upset demeanour was due to a personal matter.
SPECS
Nissan 370z Nismo
Engine: 3.7-litre V6
Transmission: seven-speed automatic
Power: 363hp
Torque: 560Nm
Price: Dh184,500
More coverage from the Future Forum
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Killing of Qassem Suleimani
Infiniti QX80 specs
Engine: twin-turbocharged 3.5-liter V6
Power: 450hp
Torque: 700Nm
Price: From Dh450,000, Autograph model from Dh510,000
Available: Now
UAE currency: the story behind the money in your pockets
World Series
Game 1: Red Sox 8, Dodgers 4
Game 2: Red Sox 4, Dodgers 2
Game 3: Saturday (UAE)
* if needed
Game 4: Sunday
Game 5: Monday
Game 6: Wednesday
Game 7: Thursday
COMPANY%20PROFILE
%3Cp%3EFounder%3A%20Hani%20Abu%20Ghazaleh%3Cbr%3EBased%3A%20Abu%20Dhabi%2C%20with%20an%20office%20in%20Montreal%3Cbr%3EFounded%3A%202018%3Cbr%3ESector%3A%20Virtual%20Reality%3Cbr%3EInvestment%20raised%3A%20%241.2%20million%2C%20and%20nearing%20close%20of%20%245%20million%20new%20funding%20round%3Cbr%3ENumber%20of%20employees%3A%2012%3C%2Fp%3E%0A
How the bonus system works
The two riders are among several riders in the UAE to receive the top payment of £10,000 under the Thank You Fund of £16 million (Dh80m), which was announced in conjunction with Deliveroo's £8 billion (Dh40bn) stock market listing earlier this year.
The £10,000 (Dh50,000) payment is made to those riders who have completed the highest number of orders in each market.
There are also riders who will receive payments of £1,000 (Dh5,000) and £500 (Dh2,500).
All riders who have worked with Deliveroo for at least one year and completed 2,000 orders will receive £200 (Dh1,000), the company said when it announced the scheme.
If you go
Flight connections to Ulaanbaatar are available through a variety of hubs, including Seoul and Beijing, with airlines including Mongolian Airlines and Korean Air. While some nationalities, such as Americans, don’t need a tourist visa for Mongolia, others, including UAE citizens, can obtain a visa on arrival, while others including UK citizens, need to obtain a visa in advance. Contact the Mongolian Embassy in the UAE for more information.
Nomadic Road offers expedition-style trips to Mongolia in January and August, and other destinations during most other months. Its nine-day August 2020 Mongolia trip will cost from $5,250 per person based on two sharing, including airport transfers, two nights’ hotel accommodation in Ulaanbaatar, vehicle rental, fuel, third party vehicle liability insurance, the services of a guide and support team, accommodation, food and entrance fees; nomadicroad.com
A fully guided three-day, two-night itinerary at Three Camel Lodge costs from $2,420 per person based on two sharing, including airport transfers, accommodation, meals and excursions including the Yol Valley and Flaming Cliffs. A return internal flight from Ulaanbaatar to Dalanzadgad costs $300 per person and the flight takes 90 minutes each way; threecamellodge.com
MOUNTAINHEAD REVIEW
Starring: Ramy Youssef, Steve Carell, Jason Schwartzman
Director: Jesse Armstrong
Rating: 3.5/5
F1 The Movie
Starring: Brad Pitt, Damson Idris, Kerry Condon, Javier Bardem
Director: Joseph Kosinski
Rating: 4/5
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
What is graphene?
Graphene is extracted from graphite and is made up of pure carbon.
It is 200 times more resistant than steel and five times lighter than aluminum.
It conducts electricity better than any other material at room temperature.
It is thought that graphene could boost the useful life of batteries by 10 per cent.
Graphene can also detect cancer cells in the early stages of the disease.
The material was first discovered when Andre Geim and Konstantin Novoselov were 'playing' with graphite at the University of Manchester in 2004.
Company%20profile
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MATCH INFO
Who: France v Italy
When: Friday, 11pm (UAE)
TV: BeIN Sports
Our Time Has Come
Alyssa Ayres, Oxford University Press
UAE currency: the story behind the money in your pockets
GAC GS8 Specs
Engine: 2.0-litre 4cyl turbo
Power: 248hp at 5,200rpm
Torque: 400Nm at 1,750-4,000rpm
Transmission: 8-speed auto
Fuel consumption: 9.1L/100km
On sale: Now
Price: From Dh149,900
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Global Fungi Facts
• Scientists estimate there could be as many as 3 million fungal species globally
• Only about 160,000 have been officially described leaving around 90% undiscovered
• Fungi account for roughly 90% of Earth's unknown biodiversity
• Forest fungi help tackle climate change, absorbing up to 36% of global fossil fuel emissions annually and storing around 5 billion tonnes of carbon in the planet's topsoil
Mohammed bin Zayed Majlis
Most F1 world titles
7 — Michael Schumacher (1994, ’95, 2000, ’01 ’02, ’03, ’04)
7 — Lewis Hamilton (2008, ’14,’15, ’17, ’18, ’19, ’20)
5 — Juan Manuel Fangio (1951, ’54, ’55, ’56, ’57)
4 — Alain Prost (1985, ’86, ’89, ’93)
4 — Sebastian Vettel (2010, ’11, ’12, ’13)
