Moody’s: There is Risk That Government Limits Access to Foreign Currency

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International credit rating agency Moody's made an announcement yesterday (September 24) and stated that it has lowered Turkey's country ceiling for long-term foreign currency bank deposits to B2 from B1.

The other country ceilings of the country have remained unchanged. While the ceiling for short-term bank deposits has remained Not Prime (NP) and the foreign currency bond ceiling has remained Ba2/NP, the local currency country ceilings for bond and deposits have remained Ba1.

"Increasingly unpredictable policy environment"

As the rationale behind the lowering, Moody's has stated, "It essentially reflects the risk that action by the government would intervene in some way to constrain deposit holders' access to their foreign currency deposits."

"Today's announcement also reflects the ongoing weakening of Turkey's institutions and the increasingly unpredictable policy environment."

"Access to foreign currency might be inhibited"

In the statement, the following emphases have been made,

"The decision to lower the foreign currency deposit ceiling to two notches below the government bond rating reflects Moody's view that the government may come to conclude that inhibiting access to foreign currency deposits is necessary if pressures on the balance of payments and thereby on its own debt are to be alleviated.

"The risk that the government places constraints on deposit holders' access to their foreign currency deposits is therefore higher than the risk that it defaults on its own debt."

Moody's has also stressed that the lowering in question "has no implications for Turkey's sovereign rating", which is currently Ba3 with a negative outlook. (EKN/SD)