New York, September 24, 2018 -- Moody's Investors Service has today lowered Turkey's country ceiling for long-term foreign currency bank deposits to B2 from B1. Other ceilings are unchanged: the ceiling for short-term bank deposits remains Not Prime (NP); the foreign currency bond ceiling remains Ba2/NP; and the local currency country ceilings for bonds and deposits remain Ba1.
Today's decision does not constitute a rating action. It has no implications for Turkey's sovereign rating (Ba3, with a negative outlook).
RATIONALE
Moody's country risk ceilings determine the maximum credit rating achievable for different classes of debt issuer domiciled in a particular country or for securitisations whose cash flows are generated from domestic assets or residents. The foreign currency deposit ceiling determines the highest rating that may be assigned to deposits held with domestic institutions denominated in foreign currency. 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.
Moody's decision to lower the foreign currency deposit ceiling reflects the rating agency's view that the risk of the government intervening to prevent the withdrawal of foreign currency-denominated deposits in order to conserve Turkey's foreign currency reserves has risen. That in turn reflects recent and prospective pressure on those reserves, the large overall value of foreign currency deposits in the banking system relative to those reserves and the recent steep currency depreciation. Turkey's central bank reserves remain very low by comparison to currency debt payments falling due over the next year, in particular by the banks and non-financial private sector companies, and continue to shrink. Moody's expects this negative trajectory to continue in the months ahead in view of the large external debt repayments coming due.
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Originally Posted by asgaridr
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