August 10, 2018 / 9:11 AM / 10 months ago

ECB growing concerned over euro zone bank exposure to Turkey: FT

FILE PHOTO: The headquarters of the European Central Bank (ECB) and the Frankfurt skyline with its financial district are photographed on early evening in Frankfurt, Germany, March 25, 2018. REUTERS/Kai Pfaffenbach/File Photo

FRANKFURT (Reuters) - The European Central Bank is increasingly concerned about euro zone banks’ exposure to Turkey, the Financial Times reported on Friday, sending bank shares lower as the Turkish lira hit yet another record low against the U.S. dollar.

The ECB, which declined to comment on the FT report, is said to be chiefly concerned about BBVA (BBVA.MC), UniCredit (CRDI.MI) and BNP Paribas (BNPP.PA). They have among the largest operations in Turkey, although their local subsidiaries’ contribution to the overall balance sheet is relatively modest.

The Turkish lira has resumed its prolonged slide as a rift between Turkey and the United States widens and concerns grow about President Tayyip Erdogan’s grip on monetary policy under a powerful new executive presidency.

A supervisory review by the ECB does not yet see the issue as critical but it is concerned that borrowers may not be hedged against the lira’s weakness, a worry since foreign currency loans make up about 40 percent of the Turkish banking sector’s assets, the FT said.

Reporting by Balazs Koranyi; Editing by Catherine Evans

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