ICI Chairman Bahçıvan: "We Demand a Financial System that Doesn't Abuse the Real Sector while Protecting the Financial Stability"

• 26.09.2018
• News

Istanbul Chamber of Industry (ICI) September ordinary Assembly meeting was held on 23 September 2018 in Odakule with the main agenda of "Looking at the Importance of Financial Stability for Turkish Economy, and Relations between the Finance World and the Real Sector with a Brand New Perspective". The guest of this meeting chaired by Ayhan Yavrucu, ICI Vice President of Assembly, was Adnan Bali, General Manager of Türkiye's Işbank.

ICI Chairman Erdal Bahçıvan made a speech regarding the Assembly agenda and attracted attention to the significant balance issues and payment difficulties faced by the real sector due to the fluctuations in the exchange rates. "While the Turkish economy is in a way passing over as-sirat*, the banks seem to be not fully comprehend this challenging period." said Bahçıvan. *the bridge set across the hell fire according to Islamic belief "We demand a financial system that doesn't abuse the real sector while protecting the financial stability.

The relationship between the finance world and the real sector is far from fulfilling the qualified financing need of our industrialists. The banking industry to return to its original function is crucial. All groups to use the moderate and limited resources correctly, effectively and efficiently will be the key in this challenging period. If this required attitude can be displayed, our industrialists can more easily overcome this difficulty with less harm."

ICI Vice President of Assembly
Ayhan Yavrucu

ICI September ordinary Assembly meeting was opened by ICI Vice President of Assembly Ayhan Yavrucu. Then, Yavrucu invited ICI Chairman Erdal Bahçıvan to the stage to make his speech about the main agenda item. Bahçıvan stated that the main function of the financial industry, transferring the limited resources from savings to investments in the most efficient way, had been forgotten in this period increasingly creating virtual wealths.

Saying that the relations between the finance world and the real sector are far from fulfilling the qualified financial needs of the industrialists for long years, Bahçıvan named accessing the needed qualified financing is still one of the biggest problems for the industrialists. Bahçıvan stated that a significant portion of the operating profits of the industrialists are spent as financing expense as shown by the ICI 500 and ICI Second 500 studies. Moreover, Bahçıvan underlined that access to financing is a bigger problem for SMEs.

Underlining that the return of the banking industry to its main function under these conditions is one of the most crucial things for the industry and the economy, Bahçıvan named the strongest factor that will unlock this challenging period is for all groups and mainly the banking industry to use the moderate and limited resources correctly, effectively and efficiently. Stating that the current period will make all the players, all the stakeholders and all the sectors of the economy to internally examine themselves as they should do, Bahçıvan underlined the responsibility and blame of everyone in allocating the resources wrong in the past.

Bahçıvan continued:

ICI Chairman Erdal Bahçıvan

"The right criticism of our dear guest, Mr. Adnan Bali saying that 'we made the unavailable feasibilities available during the abundance of liquidity', should lead all of us to stop and think about our own role in this consequence.

However, we see in this current period that our banks unfortunately act as if they do not get what the industrialists are going through while we are passing over as-sirat. No matter with how good intentions we try to see our mutual relationship, I am sorry to say that some of our banks display an attitude crossing the lines. So much that we are forced to frequently remind the saying: 'bank is the one that gives you an umbrella when the weather is good, and asks it back when the rain begins'."

Underlining the increasing examples of banks turning this period into a gangrenous state by pushing the costs and expenses off on to honest operating firms, Bahçıvan said that while it is required for the trade loans provided by banks to grow at least as much as the inflation, the situation is just the opposite. Bahçıvan said that the industrialists face some unexplainable interest rates today. Attracting attention to the fact that the experts are making valuations far from the market facts especially regarding collaterals for a long time now, Bahçıvan named this as one of the causes of the very challenging shrinkage in the cover pools of the real sector that is fully dependent to the real securities.

Bahçıvan said that they had previously expressed the extreme importance of financial stability for the operating conditions of the real sector, and continued: "However, we should not forget either that we want a system that does not abuse the real sector while protecting the financial stability. Remember that the most important disease of such periods is opportunism. If and only if the banking sector can be purified from this disease, it can contribute to the national economy. We invite the banking industry to separate those who try to manage this tough period with a constructive view from those exploiting this period. In this sense, it had became an inescapable necessity for the banking industry to review its perspective about the real sector and act more objective. Moreover, the structural issues in the Turkish economy should not be considered in a framework limited to economical measures only. These issues can only be solved with an approach including improvements regarding corporate structure in the general sense and focusing on efficiency in production, high added value and improvement of human capital. In other words, we think that the perspective adopted by the New Economy Program should be reinforced with steps supporting economic trust permanently."

Bahçıvan continued:

"We are going through a tough period. As every cloud has a silver lining, we will reach bright days at the end of these challenging ones, too. The important thing is to achieve this with minimum damage. If our banking system displays the right attitude towards our real sector with a new mentality and sensitivity, we, the industrialists, can overcome this challenge with less damage much more easily. I would like to hereby underline that I see today's meeting as a very important step taken towards this direction."

After Bahçıvan, Türkiye's Işbank Board Member and General Manager Adnan Bali took the stage and said that such meetings are higher priority in this period that the importance of coordination is higher. Describing this meeting as critical due to its timing, Bali told that Türkiye had been feeling the pain of not being able to move to a new growth model since 2012. Reminding that Türkiye will not be able to create enough employment by being stuck in the growth rate of 3-4 percent given that 1 million new people join the workforce every year, Bali stated that we face current deficit due to external resource need when there is growth and unemployment along with tax income loss when there is no growth.

Bali said that they had benefited from the period when the external resources were cheap and abundant, and now they face the challenges caused by the end of this old abundance of liquidity. Attracting attention to the fact that Türkiye had arrived to these days by overcoming some challenging events like two elections per year, terrorist attacks and coup attempt, Bali said that the root of the problems is the international non-agreement.

Defending the saying "no destiny can be enough to justify sorrow" instead of the one "geography is the destiny", Bali underlined the importance of making effort all together to solve the problems. Reminding that they had faced an unpredictable exchange rate increase following the priest crisis with USA, causing the interest and inflation to increase, Bali emphasized the important thing as preventing the attacks early on. Accepting their corporate responsibility in this period, Bali told that they are in an exchange rate attack that is not possible to be explained with any economical fact. Naming trust as the underlying cause of this issue, Bali said that Türkiye does not have a natural resource, but the business people will look at the future with confidence and the foreign investors will enter into Türkiye if an environment of trust can be created.

Türkiye's Işbank General Manager
Adnan Bali

Bali expressed his belief that the main reason behind the crisis is not the macro economy. "There are three elements composing an economy: real sector and household, public sector, finance sector. In the 2001 crisis, the problem was in the public and finance sectors. However, today, the real sector and household are in depth while the public and finance sectors are strong. This provides us some options. We should make the diagnosis correctly. In the root of the problem, there lies the international politic non-agreements. We cannot solve a crisis that is not only dependent on economic reasons with economic measures. The policies of the countries that we are allying with in the region don't coincide with the national interests of Türkiye." said Bali.

Bali said that the claim of the foreigners that none of the current problems can be solved is false as much as their previous positive views about the Turkish economy were exaggerated. "We were not that good at that time and we are not that bad right now. We have the advantage of the financial discipline. Our public debt stock figures are good. In 2001, that figure was three and half times higher. And the equity figure of the banking sector was 10 billion dollars in 2001, and it is 70 billion dollars now. While the rate of the non-performing loans is only 3 percent now, it was 27 in 2001." said Bali.

He added that despite of all these positive signs, the inflation exceeded the controllable range, the current deficit increased, and the increasing energy prices affected them badly. Mentioning the need to move to a different growth model, Bali underlined that they need to embrace an economy that will carry the society to a different league and create value by encouraging value added production. Warning that the current situation is manageable enough to turn good if managed good and bad if managed bad, Bali stated that they need to work in great coordination.

Bali said that they always look after their trade interests. "But our trade interest never precedes national interest." explained Bali. "We strive to see what else can be done for the good of our ecosystem and payers without being opportunist. Since we are not engaged in an aggressive competition with high interest rates, our deposit increase rate is lower compared to sector average. But in the same period, the increase in our loans is higher than the similar bank groups. This is because that is how we chose to manage. Because that is what our history guides us to. Since the day we were founded, we continue to serve this country with 'intelligence, caution, honesty and methodical work'."

Following the speeches, ICI Assembly Members came to the stage one by one and shared their opinions about the main agenda. Later, Türkiye's Işbank General Manager Adnan Bali answered the questions directed by the ICI Assembly Members.