(Bloomberg) -- Turkey’s banking regulator said lenders and financial companies won’t have to implement inflation accounting in 2025, removing a looming burden on bank earnings before full-year results are announced.
The watchdog, known by its Turkish initials BDDK, said late on Thursday that banks, leasing, factoring, savings finance companies and asset management firms won’t have to shift to inflation accounting, which involves adjusting balance sheets to reflect the impact of extreme price changes on key metrics including profitability.
“Expectations about this move were split, therefore we expect a positive market reaction,” said Cagdas Dogan, research director at Istanbul-based Tera Yatirim.
Turkey to Soften Inflation Accounting Rule to Shield Investments
Turkey switched to inflation accounting this year for non-financial companies after three-year cumulative domestic producer price growth exceeded 100%. Banks were exempted for 2024 but were previously told they too would shift next year.
The government had been working on the balance-sheet impact of the move after many businesses said it was jeopardizing investments as it forced them to pay more taxes. Annual inflation slowing to about 47%, down from as high as 86% in 2022, also facilitated Thursday’s decision. The central bank sees inflation ending 2025 at 21%.
Borsa Istanbul’s banking index has risen 67% so far this year, outpacing the 33% gain in the benchmark BIST-100 index.
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