The crisis in Turkey is unlikely to affect Malta, the Central Bank of Malta reassured, even though two of the Turkish banks here have balance sheets that represent 146 per cent of GDP.
In Malta, there are three licensed banks, which are either partly owned by other European institutions and listed on Borsa Istanbul, or have a controlling shareholder who is of Turkish origin.
One is licensed in Malta as a subsidiary – Yapi Kredi – while two others are branches of Turkish ones.
The two branches have what were described by sources close to the financial sector as “considerable balance sheets”. These form an integral part of the balance sheet of their head office in Turkey, the Central Bank said.
Some 99 per cent of their operations are outside Malta, meaning that their only impact on the Maltese economy is their staff and locally-purchased services.
There was a time when Malta had many more Turkish banks
Yapi Kredi, which opened 2014, on the other hand, has a much smaller balance sheet: €149 million, according to a 2017 KPMG report.
It is classified as an “international bank”, compared with the core domestic ones and the non-core domestic ones.
The Central Bank said that its balance sheet accounts for just 1.5 per cent of Malta’s GDP. This bank largely deals with related credit institutions and lends to non-resident, non-financial corporations and has no exposures in Turkish lira.
The two branches and the subsidiary have no links with the domestic economy as they mostly deal with their head office/parent or related institutions within the group and their customer base is non-resident, the Central Bank reassured.
“There was a time when Malta had many more Turkish banks but many had left after the crisis in the early years of this century. Even when they left, there was no impact on the island’s GDP,” sources said.
The Turkish currency has lost 40 per cent of its value against the dollar this year, following a worsening rift between US President Donald Trump and Turkish President Recep Tayyip Erdogan over the release of a detained American pastor.
Evangelical Christian pastor, Andrew Brunson, who is originally from North Carolina and has lived in Turkey for two decades, has been detained for 21 months on terrorism charges, which he denies.
However, the Central Bank said the loss of the value of the lira was also not a concern to Malta, as the balance sheet composition of these branches was to a very large extent in foreign currencies other than the Turkish lira.
“Furthermore, these branches largely manage their Turkish lira exposures through asset-liability management,” it said.
Mr Trump – who counts evangelical Christians among his core supporters – has said he would double previously announced tariffs on Turkish steel and aluminium imports.
On Monday, Turkey initiated a dispute complaint with the World Trade Organisation over the tariffs.
Rating agency DBRS said earlier this week that the impact on capital for the European banks most exposed to the Turkish lira was “manageable”. These are BBVA, UniCredit, BNP Paribas, ING and HSBC.