Fitch Ratings indicated that the sharp depreciation of the Turkish lira exposes banks to increased refinancing, funding, asset quality and capitalization risks. First, it said that Turkish banks face refinancing risks, given their reliance on external funding, with $102bn in foreign debt maturing in the next 12 months. The agency estimated the banks' refinancing requirements, net of more stable sources of funding, mainly from parent banks, at $55bn, which can be comfortably covered by banks. But it noted that a scenario whereby banks have to finance their foreign debt would weigh on the Central Bank of the Republic of Turkey's foreign currency reserves, policy rates and economic growth, and increase currency pressure. Second, it considered that deposit outflows could adversely impact the banks' funding and liquidity profiles, but noted that deposits have been broadly stable, as the decline in foreign-currency deposits was offset by higher local-currency deposits. Third, it expected the currency depreciation to weaken the banks' asset quality, given their high and concentrated foreign-currency loans. It forecast the banks' non-performing loans ratio to rise, given the borrowers' exposure to the lira's weakness, possible interest rate increases and weaker GDP growth. It said that the weaker asset quality should become visible in the banks' IFRS 9 disclosures at end-2018. Fourth, it anticipated the currency depreciation, higher interest rates and weaker asset quality to weigh on the banks' capital positions.   
Source: Fitch Ratings