Turkey extends NPL grace period measure, nixes FX-trade delay

ISTANBUL (Reuters) - Turkey’s bank regulator on Tuesday extended to mid-2021 a measure lengthening the grace period for reclassifying troubled loans as non-performing (NPL), and ditched a one-day delay on large FX purchases in fresh steps to free up financial markets.

The BDDK regulator also extended other measures meant to ease fallout from the coronavirus pandemic, which has worsened in recent weeks to record daily cases and deaths.

After the pandemic initially hit Turkey in March, the BDDK adopted the rule under which banks delay shifting Stage 2 and other souring loans into the NPL category, in order to help businesses struggling with cash flow.

Reuters reported last week the BDDK was mulling a six-month extension of this measure, which allows for a 180-day classification delay. The BDDK said on Tuesday it would maintain this measure through end-June.

The move could help companies as the economy dips again this winter, even while it deepens uncertainty about the true scale of Turkey’s bad-loan problem following a currency crisis in 2018.

The one-day foreign-exchange delay, now lifted, had covered trades bigger than $100,000, and on gold purchases of more than 100 grams. Turks’ record hard-currency holdings have in part pushed the lira currency to a series of record lows this year.

Since President Tayyip Erdogan overhauled his economic leadership a month ago and promised market-friendly economic reforms, regulators have peeled back several such regulations that curbed FX transactions.

Reporting by Ezgi Erkoyun and Daren Butler; Editing by Jonathan Spicer