Assessing the risks in Turkey’s banking sector

Turkey’s banks are generally in a good position to cope with sharp falls in the lira: they have large capital buffers to deal with a rise in non-performing loans, off-balance sheet instruments to mitigate the threat from currency mismatches on their balance sheets and rebuilt their foreign currency buffers over the past year, which should reduce the threat of default on their external debts. The key risk now stems from large FX deposits in the banking system – a flood of withdrawals would probably lead to capital controls. Drop-In: Turkey's Currency Crisis - Mapping the Endgame 23rd November, 2021 Join Senior Emerging Markets Economist Shilan Shah and Jason Tuvey, who leads our Turkish coverage, for a discussion about this latest crisis, the extent of potential EM contagion and likely paths ahead.