In 2012, the macroeconomic environment in Europe continued to be very difficult, although clear progress has been made throughout the year toward banking and fiscal integration. In fact, the first steps were already taken to set up single banking supervision, which is considered key to breaking the link between sovereign and banking risk.
In Turkey, the prospects for a more moderate inflation rate, a steadily improving current-account deficit and a slight slowdown in growth of domestic demand, have in the second half of 2012, led to a fall in the official interest rate for the first time in a year and a reduction in the overnight rate. The year-on-year growth in lending has remained high (16%), although below 2011 figures, and the NPA ratio remains low. Basel II regulations began to be applied in July. The impact has been slightly negative on the capital ratio of the sector as a whole, but positive in the case of Garanti. Finally, it should be noted that in November Fitch credit rating agency upgraded Turkey from speculative (BB+) to investment grade (BBB-) with a stable outlook. Among the reasons given for this are the Turkish economy’s sound banking sector and favorable growth prospects in the medium and long term.
In China, the two consecutive interest rate cuts (in June and July), the reduction of 150 basis points in the reserve ratio announced in December 2011, and increased regulatory flexibility, all helped boost bank lending in the first half of the year. This in turn helped moderate credit growth in the informal financial industry. In addition, the financial sector plan was published in September, following on from the twelfth Five-Year Plan (2011-2015). The new plan restates the intention to abolish interest-rate controls, promote financial innovation and bolster the framework of financial regulation. The Plan also establishes the goal of increasing the weight of the financial sector as a proportion of GDP in terms of added value from 4.4% in the last decade to 15% by 2015. Against this background, growth in the banking sector remained relatively stable in the second half of 2012. However, the proportion of long-term loans increased, reflecting the fact that credit flows are already moving toward public infrastructure projects and corporate investment.