Istanbul:The Turkish banking system is navigating a series of global and regional economic shocks, yet signs of progress in inflation control are contributing to a more stable economic outlook than previously anticipated. A financial director at S&P Global Ratings described the situation as "manageable."
According to Anadolu Agency – English, S&P Global convened leading representatives, firms, and financial institutions at the Türkiye Capital Markets Conference 2026 in Istanbul. Regina Argenio, the director of financial institutions at S&P Global, emphasized the significant risks faced by Türkiye's banking system but highlighted the positive impact of disinflation and a better-than-expected economic performance since the onset of the conflict in the Middle East.
Argenio pointed out that Turkish banks' ability to roll over substantial external debt is under scrutiny. She warned that disruptions in this area could pose problems but noted that the removal of regulatory deferral measures over the past year has bolstered stability. She also highlighted the challenges posed by high real interest rates, which have led to a decrease in lending, particularly affecting SMEs and retail customers.
Net interest margins are expected to improve next year if interest rates decrease, which could lead to reduced funding costs for banks dealing in Turkish lira. However, foreign currency funding costs may rise depending on interest rate dynamics. The disinflation program's success could lead to a more stable economic environment, enhancing asset quality and real profitability in the banking sector.
Argenio also mentioned that the impact of recent fund probes in Türkiye might remain limited if isolated, with a strong policy response already in place. The liquidity provided to the banking sector has helped mitigate potential impacts, although the future cost of external borrowing remains uncertain. Higher risk costs for Turkish borrowers could arise, contingent on how swiftly and effectively the situation is managed internally.