Govt opposes raising deposit guarantee level

Commenting on the global financial crisis and Ankara's response to it, Prime Minister Recep Tayyip Erdogan yesterday said the government was opposed to raising the current guarantee level for bank deposits over 50,000 YTL. "Raising the guarantee level would not be the right step," he told reporters. "It could lead to misperceptions that Turkey's economy is heading towards trouble. We cannot let such an atmosphere arise." Erdogan added, "In past years, a limitless Treasury guarantee for bank deposits did considerable harm to Turkey's financial system and caused financial crises. A hundred percent guarantee for bank deposits led to an unsound banking system because it made opening a bank an ordinary thing. The guarantee was used to exploit the Turkish people's economic resources. Due to this limitless guarantee, the Treasury had to assume the debts of failed banks." Touching on relations between the financial and real sectors, he said, "I don't approve of the financial sector trying to force the real sector into early repayment (of debts) or renewing their loan agreements with higher interest rates." He urged banks to change their attitude towards manufacturers, which he described as "unpleasant," in reference to high interest rates charged by banks at a time of global crisis. The government is working to help establish better relations between banks and manufacturers through measures to be announced soon, he added. The Turkish economy is strong and the impact of the global financial crisis will be minimal, he added.