Turkey Eases Capital Rules on Banks, Suspending Mark-to-Market

(Bloomberg) — Turkish regulators took an unconventional step to support the nation’s beleaguered banks, temporarily suspending the effect of day-to-day securities losses on how their financial strength is measured.

The new rule suspending mark-to-market calculations on capital adequacy ratios will continue until prices of securities “normalize,” the nation’s banking regulator said in a document sent to banks on Tuesday. The “recent speculative volatility in markets” caused an “unfair erosion” in banks’ capital strength, it said. Under mark-to-market accounting, portfolios must reflect assets’ current market values rather than their book values.

Turkish markets have been in turmoil this month, with the lira losing a quarter of its value against the dollar as a standoff with the U.S. over an imprisoned preacher worsened. The country’s currency crashed Friday and Monday, as did shares of lenders like Turkiye Is Bankasi AS and Akbank Turk AS, as policy makers refrained from raising interest rates to stem the rout.

The central bank has made other moves to support the banks. On Monday, it lowered the amount commercial lenders must park with the regulator and eased rules that govern how they manage their lira and foreign-currency liquidity. The central bank promised to “take all necessary measures” to maintain financial stability and said all options were on the table, but didn’t specifically mention higher interest rates.

The lira rallied Tuesday amid speculation that Turkish policy makers will ultimately heed calls from corporate and banking executives to bow to financial-market orthodoxy and raise rates. The currency rose even as President Recep Tayyip Erdogan vowed to boycott iPhones to strike back against President Donald Trump’s tariff increases and sanctions on two of his ministers.

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