Private banks rush to attract deposits from public institutions
Posted by meb at February 13th, 2008
Competition among private banks in Turkey has been heating up as they scramble to secure public deposits by offering perks to public institutions.
Since private banks will be allowed to serve as public treasurers at the end of the year, bank executives have started paying visits to bureaucrats to persuade them to move their funds. Private banks are engaging in aggressive promotions in order to secure public deposits as well as courting top level executives of the State Economic Enterprises (KİT), autonomous institutions, higher boards and hospitals.
Cars, office supplies, furniture and PC upgrades are just some of the perks intended to persuade public institutions to transfer major accounts to their banks. For instance, the Turkish Radio and Television Corporation’s (TRT) deposits amount to YTL 200 million, and half of its deposits are currently held at Ziraat Bank. Public institutions are currently only allowed to keep their deposits in Ziraat Bank, Halkbank and Vakıflar Bank, which are state banks.
“A finance organization is offering YTL 1,000 as a bonus for a salary payment scheme, while another may offer YTL 5,000,” said an official, adding: “Under these conditions, they cannot earn profits. However, they are offering such high sums because they want to make sure they make deals in advance. They are making promises — even promising to give them cars for official use — to secure deposits from these institutions.” Another official noted that this may pave the way for abuse and that private banks may apply lower interest rates to the deposits from public institutions.
Public treasurer status to be removed by year’s end
Under the standby agreements and letter of intentions with the International Monetary Fund (IMF), the public treasurer regulation that empowers state-owned banks Ziraat Bank, Halkbank and Vakıfbank to hold the deposits of public institutions will be rescinded at the end of this year. This is clearly stated in the action plan unveiled in late 2007 by the ruling Justice and Development Party (AK Party).
The competition among private banks to lure public institutions to make salary payments amounting to YTL 37 billion through their banks had been criticized by the Banking Regulation and Supervision Agency (BDDK). Criticism from BDDK President Tevfik Bilgin over the promotions was seen as sign that the agency would intervene. Bilgin had stated that they would not allow this competition to cause any disruptions in the financial composition of banks, calling on them to act with self-restraint. “Initially, this competition seemed healthy, but now it has gone out of control. Some banks are offering promotions that would disrupt their cost accounts,” he had said. Bilgin had suggested that the cost of such promotions is compensated with increased prices for money transfers, EFT and other banking services.
source: Today’s Zaman
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