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Gold savings beating banks in Turkey
1.       tunci
7149 posts
 31 Mar 2011 Thu 06:03 pm

Gold savings beating banks in Turkey

In a race to take a higher share from citizens’ savings, banks in Turkey do not compete with each other only, but also with society’s habits and fears that developed during the long inflation era. Gold is the answer for many people who do not to trust in currencies or avoid interest for religious reasons
Customers look at gold for sale at jewelry shops in the Grand Bazaar, the heart of the gold market in Istanbul, in this file photo. Turkish citizens trust gold as a safe saving instrument. Bloomberg photo
Customers look at gold for sale at jewelry shops in the Grand Bazaar, the heart of the gold market in Istanbul, in this file photo. Turkish citizens trust gold as a safe saving instrument. Bloomberg photo

For every Turk who saved in a deposit account last year, three opted for gold or cash, a December MasterIndex survey showed. Those who deposit their lira at banks refuse to do so for more than a few months, according to the survey commissioned by MasterCard Worldwide.

Failure to align deposits with increasingly long maturities of bank loans may put banks at risk, marring the Justice and Development Party, or AKP’s, nine years of record economic growth and market performance. Inflation has slowed to 4.2 percent in February from about 70 percent when Prime Minister Recep Tayyip Erdoğan’s AKP took office nine years ago.

“It’s hard to change ingrained behavior and Turks like to remain liquid,” said Michael Gomez, co-head of emerging markets at Pimco, manager of the world’s biggest bond fund, in a telephone interview from Munich.

The average maturity of lira bank deposits fell to 1.7 months in 2010, from 2.8 months in 2002, when Erdoğan, who’s seeking re-election June 12, was first elected, according to Turkish central bank data.

The median age here is 29. Eli Koen, the co-head of emerging Europe equities at Union Bancaire Privee in London and manager of $65 million in the Turkish Equity fund, said, “This is a generation who lived through extremely high, chronic and volatile inflation, without knowing what interest rates would be even a week ahead.”

He said Turkish banks are an “exciting long-term growth opportunity.” Turkish authorities are “absolutely right” to try to shift the maturity structure, he said.

In 1987, 51 percent of deposits were less than a year in maturity, according to the Banks Association of Turkey. It was 90 percent by the end of 2010. A 2001 financial crisis drove 20 lenders into receivership and forced a bailout whose cost to the country ended up being $160 billion, Deputy Prime Minister Ali Babacan, who leads economic policy, said on Feb. 21.

Turkey’s ratio of debt to gross domestic product fell below the euro’s criterion of 60 percent in 2004; this year’s budget deficit goal is 2.8 percent of GDP, below the 3 percent target.

Since Erdoğan took office, the main Istanbul Stock Exchange, or ISE, National-100 share index has quadrupled in dollar terms, outperforming the MSCI Emerging Market Index. GDP per person has almost tripled, to $10,043 in 2010, according to the Treasury.

Longer borrowing

Over the same period, the maturity of government borrowing has extended to 57 months from 9 months and the average term of bank loans has lengthened. The result of shortening deposit

maturities is a widening mismatch between the terms at which banks borrow and lend, which “constitutes a risk to the stability of the system,” according to a December 2010 central bank report on financial risks.

In a bid to get Turks to make longer deposits, central bank Governor Durmuş Yılmaz as recently as March 10 sponsored a conference on Financial Education and Awareness. Success would strengthen the banking industry, including Akbank, the lender part-owned by Citigroup., spur growth and reduce Turkey’s reliance on external financing.

Extending maturities is “part of what we have been doing,” Yılmaz said in an interview on March 15. Longer savings maturities “means more long-term funding for the banks and that’s good for the overall economy.”

Long-term belief

Bülent Gedikli, one of Erdoğan’s financial advisers, on Jan. 30 called on the 32,000 people who control half of about 587 billion liras ($378 billion) in deposits to lead the way in extending maturities.

“Turks find it harder than foreigners to see the change in fundamentals,” said Cevdet Akçay, chief economist for Yapı & Kredi Bank, the lender part-owned by Italy’s UniCredit. “Turks are slowly starting to believe that the lira is a credible currency. Believing in it as a long-term investment tool will take longer.”

With the benchmark interest rate at a historic low of 6.25 percent, the central bank is encouraging banks to offer more interest on longer deposits. Yılmaz on March 23 raised the reserves banks must set aside against liabilities such as deposits for the third time in four months. He’s penalized short-term deposits more than long-term, opening up a spread for the first time.

The reserve rate varies from 15 percent for immediate-access accounts to 5 percent for savings accounts of over a year. At İş Bank, the lender with the most deposits of non-state banks in September, according to the Banks Association of Turkey, savers can earn 8 percent on year-long deposits and 6.75 percent on those for one month.

Unchanging habits

That Turks avoid long-term bank deposits doesn’t signal a mistrust of the financial industry, according to the Banks Association of Turkey, or TBB. It’s a sign that “financial stability hasn’t yet been enough to change customer habits,” it said in response to Bloomberg News’ questions.

Banks aren’t only competing with each other for savings. They also face strong rivalry from gold, foreign currency and real estate. Those investments are seen as safer and higher yielding, according to Zeynep Çopur, an associate professor at Hacettepe University in Ankara who’s studied savings habits among families in the capital.

“Families want to feel secure and opt for instruments that can be immediately converted into cash,” she said.

“If I had anything to invest it’d be gold,” said Meriç Bada, a 24-year-old selling half-kilo bags of roasted chestnuts from a barrow in a central Ankara park. “Banks just don’t provide the kind of return that gold does.” It’s not just gold that banks are competing with. Some

Turkish Muslims prefer not to earn interest at all and instead invest their savings in profit-sharing arrangements with local businessmen.

Nebahat Akpan, a headscarved 36-year-old mother of one boy, said she’d removed the 80,000 liras from the sale of a family minibus from the bank as soon as possible. “For religious reasons I can’t leech off interest,” she said

Not : It"s hard to change Turkish People´s habits..! but at the same time there is a reason for some Turks not to put them their money in the banks, that is a religious reason. Yes,Gold is the answer for many people who do not to trust in currencies or avoid interest for religious reasons

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