(Bloomberg) -- Turkey is pressing its lenders to focus on expanding credit by lowering and even eliminating the fees earned on customer transactions, leaving banks with only a handful of commissions they can charge commercial clients.
The changes, published in the Official Gazette on Monday, cut the number and types of commissions banks can impose. The regulations are a response to client complaints such as overcharging and a lack of transparency, the central bank said.
The 12-member Borsa Istanbul Banks Sector Index fell as much as 3.4% and was down 2.1% at 4:52 p.m.
Turkey Pushing Commercial Banks to Cut Fees to Boost Economy
The new regulations add to a slew of measures already in place to revive the flow of credit.
But while consumer loan growth is picking up, commercial credit has lagged. It's up by around 20% this year, on an annualized basis and adjusted for foreign-currency fluctuations, after shrinking as much as 15% in 2019. Consumer lending has surged 50% this year.
Profit, Credit
The latest effort also underscores the government's criticism of private banks for focusing on profit instead of boosting credit at the same pace as state lenders. The decision to lower charges came after Turkey's anti-trust authorities started a preliminary probe into more than 20 banks to determine whether they violated competition law in offering deposit, credit, foreign-exchange and brokerage services to clients.
“It is pretty hard to say at this stage how much the new regulations will affect the fee revenues of the banking sector,” Deniz Invest banking analyst Sadrettin Bagci said in an emailed note. “All banks guided for much lower fee growth for 2020, mostly in high single digits. We think that state banks may be affected more negatively compared to private banks due to their high base in 2020.”
Fees and commissions account for about 12% of total bank revenue, according to data compiled by the banking watchdog. Income from the charges rose 33% in the year through December.
Below are highlights of Monday's changes:
- The number of fees and commissions for commercial clients was cut to 51 from 2,400 and to 16 from 20 for retail accounts
- Credit placement fee for corporates was capped at 1% of the amount used
- A 1 lira limit was set for retail customers' wire transfers under 1,000 liras ($167)
- The changes will go into effect March 1
The consequences for banks could be significant. The impact of the changes may be higher than suggested in lenders' recent guidance, according to Cagdas Dogan, a banking analyst at Istanbul-based BGC Partners.
“We think that these regulations have varying degrees of impact on some one-fourth of banks' total fee charges,” he said in an emailed note. “The total negative impact could be in the range of 5-10% on fees, which would indicate a hit of some 5% on annual earnings.”
To contact the reporters on this story: Ugur Yilmaz in Istanbul at uyilmaz@bloomberg.net;Asli Kandemir in Istanbul at akandemir@bloomberg.net
To contact the editors responsible for this story: Onur Ant at oant@bloomberg.net, Paul Abelsky, Mark Williams
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