Central Bank Says Extra Capital Shields Boost Resilience

The Central Bank of the Republic of Türkiye (TCMB) has released its November 2025 Financial Stability Report, detailing the outlook for the Turkish banking system amid a challenging global backdrop marked by geopolitical tensions, persistent monetary tightening in advanced economies, and fluctuating market conditions. The report emphasizes that Turkey’s banking sector remains well-capitalized, supported by profit generation and issuances of foreign currency–denominated subordinated debt. These buffers, the Central Bank noted, strengthen the sector’s capacity to absorb shocks and maintain credit supply.

In the report, the Central Bank stated: “The additional capital buffers maintained above legal requirements strengthen banks’ resilience against potential short- and medium-term risks while contributing to their lending capacity.”

Global Uncertainty, High Advanced-Economy Rates, and Shifts in Commodity Prices

The report outlines the global environment shaping Türkiye’s financial conditions. Ongoing geopolitical risks and uncertainty in global trade policies are contributing to volatility in international markets. This, in turn, has kept interest rates in advanced economies at elevated levels.

The Central Bank explains that due to persistent ambiguities around trade policy and long-term inflation expectations in the United States, the US dollar has depreciated against other advanced-economy currencies. Meanwhile, precious metal prices have climbed to historic highs, reflecting investor demand for safe-haven assets.

These global shifts have prompted banks and regulators to prioritize capital strength and prudent credit management, themes emphasized throughout the report.

Credit Growth Remains Moderate Under Tight Monetary Conditions

The Financial Stability Report notes that Türkiye’s tight monetary stance continues to shape credit dynamics, resulting in moderate credit growth. Commercial loans expanded at a pace close to flat, with the share of Turkish lira loans increasing as foreign currency loan growth weakened.

For households, the Central Bank points to a different trend: individual loans—particularly credit cards and personal loans—have contributed upward pressure on total loan growth. This reflects changing consumption patterns and rising reliance on short-term consumer financing.

Looking ahead, the Bank expects this controlled credit environment to persist due to continued tight policy measures and restrictions on foreign currency borrowing.

Asset Quality Stable, but Divergence Persists Between Household and Corporate NPLs

The report states that the banking sector’s asset quality has experienced only limited deterioration, despite a complex global and domestic environment. However, notable differences remain between household and corporate non-performing loans (NPLs). The Central Bank highlights that personal loans and credit card debt primarily drive the recent rise in household NPL ratios. However, the trend has slowed due to restructuring opportunities introduced in July.

A detailed assessment in the report explains:
“NPL ratios for SME loans remain higher compared with other firm segments. Banks are maintaining their policy of high provisioning, and these provisions limit the impact of credit risk on bank balance sheets.”

Corporate Debt Levels Remain Low Relative to GDP

One of the key findings of the November 2025 report is that the ratio of corporate sector financial debt to national income remains below both historical averages and peer-country benchmarks. According to the Central Bank, this is supported by constraints on TL commercial loan growth and tighter financial conditions, which together have helped keep lira-denominated corporate debt at relatively low levels.

The report adds an important distinction: although TL debt has remained contained, foreign-currency debt has increased, driven by firms turning to FX-denominated borrowing due to lower relative borrowing costs abroad.

The Bank elaborates further:
“The tightening of FX loan growth to 0.5%, along with the introduction of Resource Utilization Support Fund (KKDF) deductions on domestic FX loan usage, has slowed the rise in open FX positions. Furthermore, the fact that the increase in FX borrowing largely originates from firms with FX income reduces exchange rate risks.”

External Debt Rollover Rates Remain Strong at 150%

The report underscores that firms’ ability to renew external debt remains strong, with rollover ratios holding at 150%, a level indicating robust access to international financing channels. This strong external refinancing capability is described as a positive factor supporting corporate balance sheets and overall financial stability.