FINANCE E Q U I TA B L E G R O W T H , F I N A N C E & I N S T I T U T I O N S N OT E S Corporate Restructuring in Türkiye The Framework Agreements (2018–21) Fernando Dancausa © 2022 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. 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Further permission required for reuse. >>> Acknowledgments This report has been authored by Fernando Dancausa, Senior Financial Sec- tor Specialist at the Financial Inclusion, Infrastructure and Access team of the World Bank Group (WBG). The author thanks Gunhild Berg (WBG) and Etkin Ozen (WBG) for their extensive support during the research and drafting; Anto- nia Menezes (WBG) and Sergio Muro (WBG) for their helpful comments during the peer review process; and Maksym Iavorskyi (WBG) for his timely support preparing some of the figures included in the report. The author is also thankful to İbrahim Ünalmış (Professor at TED University) for organizing several meet- ings with financial institutions in Türkiye to collect data and information on their experiences with the framework agreements. The author is also grateful to Humberto Lopez (Country Director for Türkiye, WBG), Jean Pesme (Global Director for Finance, Competitiveness and Inno- vation, WBG), Lalita Moorty (Regional Director for Europe and Central Asia in Equitable Growth, Finance and Institutions, WBG), Mario Guadamillas (Prac- tice Manager for Finance, Competitiveness and Innovation, WBG), Mahesh Uttamchandani (Practice Manager for Finance, Competitiveness and Innova- tion, WBG), Hans Anand Beck (WBG), and the Türkiye Country Management Unit for their guidance and support throughout this task. The author also wishes to thank the Turkish authorities, particularly the Ministry of Treasury and Finance, the Banking Regulation and Supervision Agency, the Banks Association of Türkiye, and other relevant market participants and stakeholders for the inputs received. The findings, interpretations, and conclusions expressed in this work belong to the author and do not necessarily reflect the views or positions of either the World Bank Group, its Board of Executive Directors, and the governments they represent. >>> Summary The Framework Agreements (FAs) have been an integral part of Türkiye’s response to economic turbulence since 2002. Since their recent reintroduction in August 2018 and until December 2021, they have enabled financial institutions to restructure loans of TRY 81.2 billion (USD10.2 billion) and have supported the restructuring of 253 distressed borrowers, mostly large corpora- tions. Combined with other policy measures, the FAs have succeeded at avoiding a nonperform- ing loan (NPL) surge, although concerns remain around the sustainability of FA restructurings in the long term. All things considered, the FAs remain one of the most successful workout models introduced in recent years and illustrate how enhanced workout models can support the restruc- turing of the corporate sector in a crisis scenario. This article provides an overview of the context in which the FAs were introduced as well as their adaptation to the evolving needs of the Turkish corporate sector. It also explains the key features and objectives of the FAs, as well as the experi- ences observed by banks since their introduction. Finally, the article analyzes the impact the FAs have had in limiting the increase of NPLs in the aftermath of the 2018 currency crisis and the COVID-19 pandemic. EQUITABLE GROWTH, FINANCE, & INSTITUTIONS INSIGHT <<< 4 >>> Contents Acknowledgments 3 Summary 4 Abbreviations 7 1. Introduction 8 1.1 Credit Growth and Currency Crisis (2010–18) 8 1.2 The Policy Response (2018–21) 9 2. Development of the Framework Agreements 10 2.1 Initial Design 10 2.2 Early Reactions 11 2.3 The 2019 Amendments to the Banking Law 11 2.4 Large-Scale and Small-Scale Framework Agreements 12 2.5 The COVID-19 Pandemic 12 3. Contents and Structure of the Framework Agreements 13 4. Impact of the Framework Agreements 16 4.1 Nonperforming Loans and Corporate Restructuring in Türkiye since 2018 16 4.2 Successful Implementation of Large-Scale Framework Agreements 18 4.3 Limited Success of Small-Scale Framework Agreements 18 4.4 Views and Experiences of Banks 19 4.5 Potential Concerns 20 4.6 Framework Agreements and the Insolvency Law 21 5. Conclusion 22 EQUITABLE GROWTH, FINANCE, & INSTITUTIONS INSIGHT <<< 5 Figures Figure 1.1: CVI for Türkiye in 2017–21 including the 2018 Currency Crisis 9 Figure 1.2: Share of DAR under the ICR in Turkish Listed Firms and Other EMDEs, 2015–19 (%) 9 Figure 3.1: Timeline for Completing an FRC under the Large- Scale FA (2021 version) 15 Figure 4.1: Increases in NPL Volumes and Total Loans, 2015–21 (TRY, millions) 17 Figure 4.2: “Problem Assets” after the 2018 Currency Crisis, 2018–21 17 Figure 4.3: FA Restructured and Total Restructured Loans, 2019–21 19 Tables Table 3.1: Comparison of Large-Scale and Small-Scale Framework Agreements (2021 versions) 14 Table 4.1: Firms and Debt Restructured under the FAs and Links to NPL Indicators, 2018–21 18 EQUITABLE GROWTH, FINANCE, & INSTITUTIONS INSIGHT <<< 6 >>> Abbreviations AMC Asset Management Company BAT Banks Association of Türkiye BRSA Banking Regulation and Supervision Agency CCI Consortium of Creditor Institutions CVI Corporate Vulnerability Index DAR Debt-at-Risk EBC Turkish Execution and Bankruptcy Code ECB European Central Bank EMDE Emerging Markets and Developing Economies FA Framework Agreement FRC Financial Restructuring Contract FX Foreign Exchange GDP Gross Domestic Product ICR Interest Coverage Ratio IFRS International Financial Reporting Standard NPL Nonperforming Loan PD Probability of Default RCT Regulation on Credit Transactions of Banks REPL Regulation on Procedures and Principles for Classification of Loans and Provisions to Be Set Aside SME Small and Medium Enterprise TRY Turkish Lira USD United States Dollar WBG World Bank Group EQUITABLE GROWTH, FINANCE, & INSTITUTIONS INSIGHT <<< 7 1. >>> Introduction 1.1  Credit Growth and Currency Crisis (2010–18) Before the 2018 currency crisis, Türkiye had experienced a decade of sustained economic growth, with its gross domestic product (GDP) averaging a 6.8 percent increase from 2010 to 2018.1 The financial sector, particularly bank credit, played a critical role in this economic expansion. Credit to corporations more than doubled after 2010,2 and banking sector assets to GDP increased from 80 to 110 percent during those years.3 This period of economic expansion led to macro-financial imbalances, however, including a highly leveraged corporate sector. As of 2018, Türkiye featured one of the highest corporate debt-to-GDP ratios among emerging countries, rising from 56 per- cent of GDP at the end of 2014 to 77 percent in 2018. Notably, about 90 percent of this increase stemmed from a rise in foreign exchange (FX) debt and, as a result, about 65 percent of corporate debt to GDP was FX denominated by 2018.4 Against this background, many Turkish corporations were brought to the brink of default when the 2018 currency crisis hit.5 On the solvency side, firms experienced a rapid increase in financial leverage as total debt surged dramatically because of the FX effect. Simultaneously, firms also ex- perienced increased pressure on their debt-servicing capacity, which caused the interest cover- age ratio (ICR) to deteriorate sharply, falling to 0.90 by the end of 2018.6 The combination of these two factors led to a significant increase in corporate vulnerability, as measured by the Corporate Vulnerability Index (CVI) (figure 1.1).7 Similarly, the share of debt at risk (DAR)8 suggested that the amount of debt held by listed companies considered as likely to default by 2019 had doubled since 2015 (figure 1.2). The energy, telecommunications, and real estate sectors suffered most from the lira devaluation. 1. World Bank national accounts data, 2022. 2. WBG (World Bank Group), “Turkey Economic Monitor: Steadying the Ship” (WBG, Washington, DC, December 2018), 11. 3. Banking Regulation and Supervision Agency (BRSA) data and Black Sea Trade and Development Bank, 2020. 4. WBG, “Turkey Economic Monitor,” December 2018, 23. 5. The Turkish lira lost about 25 percent of its value against the US dollar in the first two weeks of August 2018 and about 40 percent of its value from the beginning of 2018 to the same date. 6. WBG, “Turkey Economic Monitor,” December 2018. The ICR is a debt and profitability ratio used to determine how easily a company can pay interest on its outstanding debt. An ICR ratio of 0.9 is significantly below the critical threshold of 1.5, which is generally considered a proxy for high likelihood of default. 7. The CVI measures the creditworthiness of a selected region, economy, or portfolio. The equally weighted CVI, displayed in figure 1.1, is the average value of the individual probabilities of default (PDs) of Türkiye’s largest firms. Dataset available at https://nuscri.org/en/view_cvi/8501/. 8. The share of DAR is measured by the ratio of the debt of corporations that have an ICR of less than 1.5 over total debt. EQUITABLE GROWTH, FINANCE, & INSTITUTIONS INSIGHT <<< 8 1.2 The Policy Response (2018–21) cial crisis.10 Because of the positive outcomes observed during the previous crisis, the reintroduction of the FAs was the solu- Concerned about the mounting difficulties faced by the corpo- tion selected to address the needs of the largest borrowers. rate sector and potential threats to financial stability, the Turk- Simultaneously, and as part of the New Economy Program, the ish authorities designed a midterm plan in the summer of 2018 authorities introduced reforms to improve the governance struc- aimed at mitigating the effects of the currency depreciation.9 tures and activities of asset management companies (AMCs) The idea underlying the reform was to segment the market of to support banks’ efforts in improving asset quality via nonper- distressed borrowers according to their size and complexity forming loan (NPL) sales. In parallel, the Ministry of Justice also and then optimize or introduce specific debt resolution proce- introduced key upgrades to insolvency and enforcement proce- dures according to the needs and features of each segment. dures11 and embarked on the overhaul of the Turkish Execution One of the main pillars supporting the reform package was and Bankruptcy Code (EBC). Finally, the Banking Regulation a renewed emphasis on corporate restructuring, which had and Supervision Agency (BRSA) adopted macroprudential played a vital role in Türkiye’s exit strategy from its 2002 finan- measures encouraging the restructuring of retail loans.12 > > > > > > FIGURE 1.1:   CVI for Türkiye in 2017–21 including the FIGURE 1.2:   Share of DAR under the ICR in Turkish 2018 Currency Crisis Listed Firms and Other EMDEs, 2015–19 (%) 250 80 200 60 150 40 100 20 50 0 0 2015 2016 2017 2018 2019 17 7 M c. 017 Ju 9, 7 24 18 M . 1 018 13 018 O 8, 9 Fe 31, 9 Ju 25, 19 O 9, 0 0 0 Se e 3 21 8, 1 21 g. 01 2 01 ly 01 1 2 . 1 02 b. 02 . 2 02 ril 20 ly 20 20 b. 20 ne 20 0 20 Kazakhstan Mexico South Africa Türkiye Au 4, 2 D 9, 2 ch 2 ov , 2 ch 2 Ju , 2 2 Fe , 2 Ju 8, 2 pt , 2 Ap . 1, ar 4, ar 6, 4 1 1 n . n Ja e ct ct N Source: Credit Research Initiative, National University of Singapore (NUS) Source: Corporate Vulnerability Index, World Bank Group (WBG); WBG staff 2022. calculations. Note: CVI: Corporate Vulnerability Index. See footnote 7. Note: DAR: Debt At Risk. See footnote 8. ICR: Interest Coverage Ratio. See footnote 8. 9. The Ministry of Finance announced a “New Economy Program” in September 2018, which included, among others, specific reforms aimed at improving asset quality and NPL resolution. See https://ms.hmb.gov.tr/uploads/2018/10/OVP_Sunum_v11_INGILIZCE.pdf, slide 12. 10. See “From Crisis to Stability (Turkey Experience),” BRSA’s Working Paper (2009). 11. Amendments to the EBC were introduced in February 2018, repealing the postponement of bankruptcy procedure and modernizing the already existing concordat pro- cedure, which quickly became the most widely used restructuring procedure in Türkiye. The concordat procedure is a debtor-in-possession procedure that allows the borrower to propose and complete a restructuring with ordinary creditors. Secured creditors are however considered “privileged creditors” and left outside the scope of concordat restructurings. Additional amendments were also introduced in 2019 to strengthen the skills and professionalism of insolvency administrators. 12. See Provisional Articles introduced to the Regulation on Credit Transactions of Banks (RCT): No. 3 (2018); No. 6 (2019); and No. 7 (2019) https://www.bddk.org.tr/Mevzuat/ DokumanGetir/983. See also Board Decision of the BRSA Nr. 9811/dated 16 September 2021. EQUITABLE GROWTH, FINANCE, & INSTITUTIONS INSIGHT <<< 9 2. >>> Development of the Framework Agreements 2.1 Initial Design The first step in designing and implementing the FAs was taken by the BRSA, which issued the Regulation on Restructuring of Debts to the Financial Sector (BRSA’s Restructuring Regulation) in August 2018 as a means of encouraging financial institutions to “restructure the loans of dis- tressed borrowers so that they can continue fulfilling their repayment obligations and preserve employment.”13 To do so, BRSA’s Restructuring Regulation mandated the Banks Association of Türkiye (BAT) to prepare a multicreditor agreement setting out the steps and conditions that finan- cial institutions subscribing to the FA agree to apply to the restructuring process. Adherence by financial institutions to the FA is strictly voluntary, although those institutions that adhere are fully bound by its terms. After months of negotiations, the first FA was endorsed in September 2018 by financial institutions14 representing more than 90 percent of financial sector assets. The BRSA approved it shortly afterward. The FA’s main objective was to encourage the restructuring of large corporate loans, and therefore only borrowers with a total debt exceeding TRY 100 million were eligible to apply.15 The FA was designed as a temporary tool and was expected to remain in place for only two years. Simultaneously with the introduction of the FAs, the BRSA also introduced important amendments to its prudential standards to encourage the use of the FAs—and of corporate restructuring more generally—by banks.16 These amendments relaxed some of the strict classification requirements that had been applicable to loan forbearance since 2018, when Türkiye transitioned to Interna- tional Financial Reporting Standard (IFRS) 917 and eliminated several automatic events triggering 13. BRSA’s Regulation on the Restructuring of Debts to the Financial Sector, published in the Official Gazette of Türkiye, August 15, 2018, no. 30510. The quote in italics is an extract from Article 1 of the Regulation. 14. These financial institutions include banks and leasing, financing, and factoring companies. 15. Two other additional criteria apply to debtors willing to access the FA restructuring process: (a) debtors must not have been subject to legal proceedings and (b) debtors are not in bankruptcy proceedings. 16. BRSA’s Restructuring Regulation also introduced changes to the Regulation on Procedures and Principles for Classification of Loans and Provisions to Be Set Aside (REPL). 17. With the 2018 amendments, articles 7.2 on forbearance and 7.4 on financial difficulty were repealed from the REPL. EQUITABLE GROWTH, FINANCE, & INSTITUTIONS INSIGHT <<< 10 Stage 2 classification.18 In particular, the amendments pro- 2.3 The 2019 Amendments to the vided banks with the option to observe shortened probation periods when upgrading restructured Stage 2 loans19 to per- Banking Law forming loans, under certain conditions.20 In light of the shortcomings identified in the 2018 FA (as dis- cussed later in section 4), as well as the surprisingly low lev- els of applications observed in its first year of application, the 2.2  Early Reactions BRSA and the Ministry of Treasury and Finance took deci- Criticism arrived in the first months following publication of the sive steps to increase the attractiveness of the FAs. Amend- FAs. International creditors, who had initially been excluded ments to the Banking Law23 were adopted in July 2019, and from the scope of the FA as they remained outside the scope the reform took a broad approach addressing several dimen- of BRSA’s supervision, demanded their participation in FA sions. First, it provided the legislative basis necessary to restructurings so they could benefit from the terms agreed support and encourage financial institutions to engage in cor- to in the individual restructuring agreements. To accommo- porate restructuring, which until then had only been partially date their request, the authorities introduced an amendment provided by the BRSA’s Restructuring Regulation. Second, it to the BRSA’s Restructuring Regulation in November 2018 introduced several incentives that reached outside the scope so that both foreign creditors and international organizations of the FAs, including (a) exemption from embezzlement risk could join the restructuring agreements on an ad hoc basis, where the restructuring involved debt forgiveness,24 (b) even without being permanent members of the Consortium exemption from several taxes typically accrued in a restruc- of Creditor Institutions (CCI).21 The amendment specified turing scenario,25 and (c) the possibility for banks to trans- that no prior consent by CCI members was required for for- fer loans to special purpose vehicles and funds below book eign institutions to join the restructuring of a distressed bor- value. These amendments to the Banking Law were also intro- rower.22 No acceptance quorum was required either. A new duced as temporary measures and were expected to remain version of the FA was published in January 2019 to ensure applicable for only two years, although extendable by another consistency with the updated version of BRSA’s Restructur- two years at the discretion of the president. ing Regulation. Following the addition of Provisional Article 32 to the Bank- ing Law, the BRSA reviewed its Restructuring Regulation26 to avoid overlaps and to ensure consistency with the Provisional Article,27 and in that process, the BRSA also reserved to itself the right to request information on the terms of the FA restruc- turings as part of its supervisory activities. 18. IFRS 9 specifies how an entity should classify and measure financial assets, financial liabilities, and some contracts to buy or sell nonfinancial items. 19. Stage 2 assets, in the context of IFRS 9, are financial instruments that have deteriorated significantly in credit quality since initial recognition but offer no objective evidence of a credit loss event. 20. According to Article 7/8 of the REPL, performing forborne Stage 2 loans can be reclassified under Stage 1 and exit from forborne status at the end of a three-month mon- itoring period only if (a) there is no delinquency in principal and/or interest payments of more than 30 days for any loan to the debtor, and (2) the financial difficulty that caused the application of the forbearance measure has disappeared. 21. Regulation Amending the Regulation on Restructuring of Debts to the Financial Sector, published in the Official Gazette, November 21, 2018, no. 30602. 22. See section VI.1 of the January 2019 version of the FA. 23. These legal amendments were introduced on July 17, 2019, via Provisional Article 32, which was added into the current Banking Law No. 5411. In addition, and as part of the initiative to improve NPL resolution, other amendments were also introduced into the existing Article 53 of the current Banking Law to regulate the write-off procedure and its tax implications. 24. Bank officials in Türkiye have been reluctant to engage in restructuring negotiations involving debt forgiveness, because there is a possibility they would face criminal sanctions of embezzlement. A first attempt to address this obstacle was the 2017 amendment to Article 160 of the Banking Law, which included a specific provision ex- empting several transactions from the scope of embezzlement, although accepting partial debt forgiveness in a restructuring context, even if granted when the borrower is in financial difficulties, was not included among the newly introduced exemptions. Provisional Article 32, however, addressed the problem by expressly mentioning that reductions in collateral, debt reductions, and write-offs do not constitute embezzlement, although its scope is limited only to FA restructurings. As a result, banks still do not accept debt reductions outside of FA restructurings even when the position of the borrower is considered unsustainable. 25. Including the Banking and Insurance Transactions Tax, the Resource Utilization Support Fund, and some value added tax taxable events. 26. In 2019 there were six changes in BRSA’s Restructuring Regulation, five of which mainly consisted of rewordings, adding details, or other minor elaborations. The remaining amendment was the provision on the notification to the BRSA (amended article 9). 27. Regulation Amending the Regulation on Restructuring of Debts to the Financial Sector, published in the Official Gazette, September 12, 2019, no. 30886. EQUITABLE GROWTH, FINANCE, & INSTITUTIONS INSIGHT <<< 11 Large-Scale and Small-Scale 2.4  2.5  The COVID-19 Pandemic Framework Agreements The Large-Scale and Small-Scale FAs were expected to To implement the changes introduced to the Banking Law and remain in place until July 2021, but their application was BRSA’s Restructuring Regulation, the BAT developed a new, sig- extended until July 2023 as part of the plans to mitigate the nificantly altered version of the FA. The most important novelty effects of COVID-19 and promote economic recovery.29 In was the publication of two distinct FAs, one applicable to large July 2021, a new version of the FAs was again developed by corporations (the “Large-Scale” FA), and another applicable to the BAT, introducing substantial changes to the restructuring small and medium borrowers (the “Small-Scale” FA).28 The key process under the FAs. Among other amendments, the debt criterion determining the application of one FA or the other was threshold applicable under the Large-Scale FA was revised the debt threshold: the Small-Scale FA was applicable to bor- and increased again to TRY 100 million, which was the ini- rowers holding outstanding debt below TRY 25 million, and the tial amount under the 2018 version. The Small-Scale FAs Large-Scale FA was applicable to borrowers holding outstand- were also reset to be applicable to restructurings below that ing debt above TRY 25 million. The difference in approaches amount. In addition, key parameters featured in restructur- taken by the two FAs is discussed later. By implementing this ings under the Large-Scale FA were updated, including matu- dual approach, the BAT attempted to address the concerns of rity, grace period, and interest rates. For Small-Scale FAs, the distressed small and medium enterprises (SMEs), which were 2021 amendments also introduced measures to avoid delays initially excluded from the scope of the 2018 FA and therefore in the preparation of the feasibility report. could not enjoy the benefits provided under the amendments to the Banking Law. 28. The original 2018 version featured no debt scale but only a threshold of TRY 100 million of total debt, which all borrowers had to meet if they wanted to apply to restruc- turings under the FAs. 29. To support recovery from the pandemic, the implementation period was extended for another two years with Presidential Decree No. 4299, dated July 14, 2021. EQUITABLE GROWTH, FINANCE, & INSTITUTIONS INSIGHT <<< 12 3. >>> Contents and Structure of the Framework Agreements The system designed by the FAs incorporates key aspects observed in other countries to encourage corporate workouts.30 Within the different classifications of workouts available, the FAs can be defined as an “enhanced” procedure.31 Although some differences in approach and structure exist between the Large-Scale and Small-Scale FAs, both are based on the following fundamental pillars: • An intercreditor agreement (the FA) is signed by financial creditors setting out procedural ele- ments to complete negotiations, including (a) a mechanism to adopt decisions by the CCI; (b) a standstill, under which creditors temporarily commit to refrain from undertaking collection actions. The terms included in the FA bind only those creditors that signed the FA (but all sign- ers are bound by it) and apply to all negotiations under the FA, which may lead to a successful restructuring or not. • Borrowers are not part of the FAs but must voluntarily request a restructuring from the CCI and be willing to cooperate and abide by the rules set out in the FA.32 In turn, creditors commit to engage in restructuring negotiations and to respect the standstill. • The restructuring process is a case-by-case restructuring in which every debtor’s restructur- ing prospects are considered separately. Negotiations are normally led by the creditor holding the largest amount of outstanding debt (“Lead Creditor”). The CCI adopts decisions with the approval of at least two creditors (in number) representing at least two-thirds of the total out- standing debt of the borrower (in value).33 If negotiations succeed and a majority of creditors agree, an individual agreement reflecting the specific restructuring terms of the debtor can be imposed (“crammed down”) on dissenting creditors and be formalized. This is referred to as the Financial Restructuring Contract (FRC). 30. See Jose M. Garrido, “Out-of-Court Debt Restructuring” (World Bank, Washington, DC, 2012). Workouts involve changing the composition and structure of assets and liabilities of debtors in financial difficulty, without resorting to a full judicial intervention, and with the objective of promoting efficiency, restoring growth, and minimizing the costs associated with the debtor’s financial difficulties. 31. See Antonia Menezes et al., A Toolkit for Corporate Workouts (Washington, DC: World Bank Group, 2022). Enhanced workouts are defined as “restructurings in which participants are bound by law, regulation, or contract to follow restructur- ing-specific standards introduced by an administrative authority such as a central bank, in accordance with an expectation or requirement set out by that authority, but where there is no provision for the court to play a role” (4). 32. The FAs include a template letter of application under which the debtor undertakes not to incur additional liabilities, grant additional security interest over its assets, or enter transactions that may amount to “preferences” while restructuring nego- tiations are ongoing. 33. Some “reserved matters” require a higher threshold for adoption, including the decision to grant additional financing to the borrower, which requires a 90 percent threshold, and the decision to write down debt, which requires a unanimous decision by the CCI. EQUITABLE GROWTH, FINANCE, & INSTITUTIONS INSIGHT <<< 13 • All participating creditors are expected to share information access the restructuring. Unlike in formal bankruptcy pro- with other members of the consortium, although all mem- cedures, once the restructuring has been approved by the bers must commit to keeping all information obtained during CCI no independent analysis verifies the feasibility of the the restructuring strictly confidential. restructuring plan or determines whether the rights of credi- tors have been respected in the FRC. • The restructuring process is time bound, and the CCI has a deadline to agree to an FRC with the debtor, which varies The Small-Scale FAs share the features of Large-Scale FAs but depending on whether the borrower is considered Large- rely on simpler, abridged procedures. Key among the specifics Scale or Small-Scale. The timeline for completing a restruc- of Small-Scale FAs are the following: (a) the standstill period is turing under the Large-Scale FA is summarized in figure 3.1. reduced to 50 days, (b) the intervention of a third-party expert • The initial FAs—and the Large-Scale FAs in the 2019 and is not required to assess viability, (c) the incorporation of the 2021 versions—require a positive viability assessment per- CCI is not required, and (d) certain restructuring terms are ex- formed by an independent expert34 to allow debtors to cluded from the Small-Scale FA scope (see table 3.1). > > > TABLE 3.1:  Comparison of Large-Scale and Small-Scale Framework Agreements (2021 versions)   LARGE-SCALE FA SMALL-SCALE FA Eligibility Borrowers with outstanding debt above TRY 100 Borrowers with outstanding debt below TRY 100 million million Duration of the 90 working days, which can be extended to 180 days No specific standstill period, but there are time limits to complete steps standstill with the approval of the consortium during the standstill period amounting to 50 working days CCI Always incorporated Not incorporated Lead creditor Appointed by the CCI to manage the process and A creditor holding one of the three largest exposures to the borrower; lead negotiations; normally, it is the creditor institution must receive the application and lead negotiations with the largest exposure Restructuring Any restructuring transaction, including loan Restructurings must consist only of debt rescheduling, refinancing, terms write-off and debt-to-equity conversions, as well interest write-offs, and debt assignments as debt rescheduling and refinancing Limits to None Maximum 84 months and 24 months, respectively; guidance provided rescheduling and on interest rates and frequency of installmentsa grace periods Viability analysis Performed by an independent expert appointed Performed by the creditor institution that accepted the borrower’s by the CCI and completed before opening a application restructuring procedure Source: World Bank. Note: CCI = Consortium of Creditor Institutions. FA = Framework Agreement. TRY = Turkish lira. a. See the section on “Restructuring Parameters” under section VIII of the Small-Scale Framework Agreement (2021). 34. The 2019 and 2021 versions of the Large-Scale FAs require that the independent expert must be an audit firm registered in the Official Registry of Independent Audit Firms, founded and operating according to the principles of the Independent Audit Regulation promulgated in the Official Gazette numbered 28509 and dated December 26, 2012. See section V(c) of both versions. EQUITABLE GROWTH, FINANCE, & INSTITUTIONS INSIGHT <<< 14 > > > FIGURE 3.1:   Timeline for completing an FRC under the Large-Scale FA (2021 version) DAY DAY* DAY* DAY* 0 3 6 10 Debtor applies to one The Application Bank Incorporation of the Appointment of the of three creditor institutions informs other banks of Consortium of Creditor Leader Bank and the holding the largest amount the debtor’s application Institutions (CCI) Feasibility Expert of debt and requests them to report outstanding debts Standstill starts DAY DAY* DAY* DAY* 180 90 45 30 If required majorities to Formalization of the FRC Feasibility study Other creditors not approve the FRC are not by the CCI in case the is completed part of the CCI, including reached, extension of the required majorities have foreign creditors, may standstill for been reached join negotiations and 90 additional days** the CCI Cram-down of dissenting Standstill ends CCI members Source: World Bank staff elaboration based on Framework Agreement, 2021. Note: The timeline is based on the Large-Scale Framework Agreement (2021). Estimates provided for Day 30 and Day 45 are practical assumptions. *Business days. **Subject to provisional articles granting time extensions because of COVID-19. See Section XIV—Provisional Article. FA = Framework Agreement. FRC = Financial Restructuring Contract. EQUITABLE GROWTH, FINANCE, & INSTITUTIONS INSIGHT <<< 15 4. >>> Impact of the Framework Agreements 4.1  Nonperforming Loans and Corporate Restructuring in Türkiye since 2018 Despite recent adversities, NPL levels in Türkiye have remained moderate.35 The 2018 currency cri- sis triggered a sudden increase in NPLs, which peaked at 5.4 percent in December 2019, although they steadily declined in the following two years and reached 2.9 percent as of December 2021. In absolute terms, NPLs were standing at TRY 159.8 billion as of December 2021 (USD18 billion) and have remained practically flat since September 2019. Two key factors explain these dynamics: (a) a sustained credit growth observed in recent years, especially in the aftermath of the COVID- 19 pandemic, kept the NPL ratio at moderate levels because of the “denominator effect” (figure 4.1); and (b) a renewed emphasis on corporate restructuring, which avoided the classification of distressed loans as NPLs but led to strong increases in restructured loans and Stage 2 loans. The FAs were a critical instrument in preventing an NPL surge under this second factor. Since the currency crisis hit Türkiye in 2018, banks have engaged in extensive loan restructuring to address corporate distress. Restructured loans, including those restructured under the FAs, have experienced a fourfold increase in only three years (between 2018 and 2021), surging from TRY 78 billion36 (USD16 billion) as of December 2018 to TRY 320 billion (USD36 billion) as of De- cember 2021 (figure 4.2). As a result of this increase, restructured loans represented 6.1 percent of the total loan portfolio as of December 2021. The strong increase in restructured loans also brought a drastic increase in Stage 2 loans during this period, because most restructured loans are presumably reported as Stage 2 loans by banks.37 Stage 2 loans peaked at 11.1 percent of total loans as of December 2021 (figure 4.2).38 More importantly, after experiencing a 111 percent increase since 2018, Stage 2 loans were 3.4 times higher than NPLs in terms of volume as of December 2021. 35. Unless stated otherwise, the source for data on asset quality mentioned in this section was Fitch Ratings, based on selected Turkish banks. 36. US dollar amount has been calculated taking into consideration the volumes of debt restructured under the FAs since 2019, as well as the average FX rate applicable at the end of each of those years. 37. Although no official data are available on the classification of restructured loans, it seems reasonable to assume that most restructured loans are classified as Stage 2 loans post-restructuring. 38. The ratio of Stage 2 loans over total loans stood at 11.1 percent as of December 2021, having stood at 3.7 percent as of December 2017. This ratio is based on data from the six largest banks in Türkiye, representing more than 67 percent of total banking sector assets by December 2021. The BRSA does not publish official figures on Stage 2 loans or restructured loans. EQUITABLE GROWTH, FINANCE, & INSTITUTIONS INSIGHT <<< 16 > > > FIGURE 4.1:   Increases in NPL Volumes and Total Loans, 2015–21 (TRY, millions) 6,000,000 180,000 160,000 5,000,000 140,000 4,000,000 120,000 100,000 3,000,000 80,000 2,000,000 60,000 40,000 1,000,000 20,000 0 0 0 May 2019 Sep. 2020 May 2015 Sep. 2015 Jan. 2016 May 2016 Sep. 2016 Jan. 2017 May 2017 Sep. 2017 Jan. 2018 May 2018 Sep. 2018 Jan. 2019 Sep. 2019 Jan. 2020 May 2020 Jan. 2021 May 2021 Sep. 2021 Jan. 2022 Jan. 2015 Total loans (left axis) NPLs (right axis) Source: Fitch Ratings Turkish Banks Datawatch; WBG staff calculations. Note: NPL = nonperforming loan. TRY = Turkish lira. > > > FIGURE 4.2: “Problem Assets” after the 2018 Currency Crisis, 2018–21 600 500 400 300 200 100 0 2018 2019 2020 2021 Total Stage 2 loans (billion TRY) Total restructured loans (billion TRY) Total NPLs (billion TRY) Sources: Fitch Ratings Turkish Banks Datawatch, BAT data; WBG staff calculations. Note: In June 2021, the BRSA published the “Non-Performing Exposures Workout Guidelines” in which problem assets are defined as “restructured loans and non-performing loans.” NPLs = nonperforming loans. TRY = Turkish lira. BAT=Banks Association of Turkiye. EQUITABLE GROWTH, FINANCE, & INSTITUTIONS INSIGHT <<< 17 Successful Implementation of Large- 4.2  observed under formal restructuring procedures in Türkiye.41 In terms of volumes of debt restructured, FA-restructured loans Scale Framework Agreements have continuously grown on a yearly basis and reached TRY 78 Despite high expectations for FAs and inclusion of foreign billion as of December 2021 (USD10 billion). FA-restructured creditors in their scope, initial uptake of the FAs was rather lim- loans increased by 77 percent in 2021 alone and are expected ited: only about a dozen applications were recorded in 2018 to continue growing at a similar pace in 2022. As a result of and the first half of 2019. The few applications received during this increase, FA-restructured loans have consistently gained this period were rejected by the CCI, mainly because they did prominence and represented 24.5 percent of total restructured not comply with formal requirements. Two factors explain this loans as of December 2021 (figure 4.3). lack of interest: (a) the absence of tax incentives applicable to restructuring measures like debt forgiveness, debt assign- Limited Success of Small-Scale 4.3  ments, and debt-to-equity conversions39 and, more importantly, (b) the thorough information requirements that applicants had Framework Agreements to meet, which extended not only to the distressed borrower Despite their success in restructuring large corporate loans, but also to its shareholders. FAs have not succeeded in serving the needs of smaller firms. As of December 2021, only 33 firms had been able to restruc- Restructuring applications increased dramatically, however, af- ture successfully under Small-Scale FAs since their introduc- ter Provisional Article 32 was introduced in the Banking Law: tion in 2019, which led to only TRY 408 million in restructured 97 firms entered the FA procedure in the last quarter of 2019, loans.42 The main reasons for this lack of success include the followed by 226 firms in 2020, and 98 firms in 2021 (see table natural preference of smaller firms to rely on a single financial 4.1). More importantly, 60 percent of the firms that accessed institution for financing, which makes bilateral restructurings the FA procedure were able to successfully restructure and more efficient. In addition, smaller firms face excessive formali- continue operating once the restructuring procedure was com- ties that hamper their access to the FA procedure, including the pleted.40 This success rate is significantly higher than any rate obligation to provide additional collateral to start restructuring > > > TABLE 4.1: Firms and Debt Restructured under the FAs and Links to NPL Indicators, 2018–21   2018 2019 2020 2021 TOTAL (AS OF DECEMBER 2021) Number of firms admitted to the FA restructuring 0 97 (48 groups) 226 (77 groups) 98 (23 groups) 421 (148 groups) procedure Number of firms that successfully restructured 0 6 (2 groups) 147 (46 groups) 100 (23 groups) 253 (71 groups) Debt amount restructured (billion TRY) 0 5.48 27.31 48.42 81.2 Total Stage 2 loans (billion TRY)* 257 300 370 543 n.a. Total restructured loans (billion TRY)* 78 151 192 320 n.a. Total NPLs (billion TRY) 96 152 151 160 n.a. Share of FA-restructured loans/Total Stage 2 0 1.80% 8.90% 14.96% n.a. loans** Share of FA-restructured loans/Total 0 3.60% 17.10% 25.38% n.a. restructured loans** Source: Banks Association of Türkiye (BAT) data. Note: FA = Framework Agreement. n.a. = not applicable. NPL = nonperforming loan. TRY = Turkish lira. *BAT member’ quarterly balance sheet data, collected by BAT as of December 2021 and presented in April 2022. **These ratios have been calculated using the cumulative debt restructured as of the end of the year. 39. See Menezes et al., A Toolkit for Corporate Workouts, section 2.12, on the enabling environment for corporate workouts; includes a discussion on tax considerations and incentives, explaining their importance in supporting corporate restructurings (box 6). 40. Of the 421 firms that have accessed the FA restructuring procedure since 2019, 253 firms had successfully restructured as of December 2021. A significant number of the remaining 168 firms remained in negotiations with their creditors as of December 2021 and potentially could achieve a restructuring as well in 2022. 41. In its final edition, the World Bank Doing Business report, 2020, estimated that formal restructuring procedures (concordat) would end in a piecemeal liquidation and that creditors would receive 10.5 cents on the dollar at the end of that process. 42. These figures include the number of firms and debt restructured under the 2019 and 2021 versions of the FAs. . EQUITABLE GROWTH, FINANCE, & INSTITUTIONS INSIGHT <<< 18 > > > FIGURE 4.3:  FA Restructured and Total Restructured Loans, 2019–21 350 40% 300 30% 250 TRY Billions 200 20% 150 100 10% 50 0 0% 2019 2020 2021 Total restructured (billions) (left axis) FAs restructured (billions) (left axis) FA restructured loans/total restructured loans (%) (right axis) Source: Banks Association of Türkiye (BAT) data on FAs and Classification of Loans; World Bank Group staff calculations. Note: Total restructured loans include data for a selected group of Turkish banks published by Fitch Ratings in 2022. Data for FA-restructured loans are based on the amounts of debts restructured published by BAT and include amounts restructured under the Large-Scale FAs only. FA = Framework Agreement. TRY = Turkish lira. negotiations or a lack of coordination within the consortium of point, the FAs tested the effectiveness and enforceability of creditors when a restructuring petition is rejected by a leading the BRSA Regulation and demonstrated that the promotion creditor.43 The costs associated with the FA process are also a of restructuring activities requires introducing obligations significant deterrent for smaller firms. and incentives that can only be applied by statute. Indeed, it was only after the introduction of Provisional Article 32 in the Banking Law that FA restructurings began to materialize, a 4.4 Views and Experiences of Banks finding which suggests that it would have been optimal if the FAs had been endorsed by the Banking Law from the outset. The World Bank Group collected views from the six largest banks in Türkiye44 to understand the dynamics of and drivers • From a timing perspective, it would have been preferable if behind the restructurings agreed under the FAs. The following the FAs had been introduced, and widely used, as early as key findings were reported through a survey circulated among mid-2018, when corporate vulnerability peaked. There was some banks: a significant lag (almost a year) between the 2018 currency crisis and the 2019 amendments to the Banking Law, which • The FA system has met banks’ expectations and has proved meant that banks had already restructured significant loan to be an effective tool for restructuring loans, especially volumes by the time the FAs could be relied on. Large prob- when there are multiple lenders. A key development that lematic loans in the energy and construction sectors had encouraged banks’ participation in the process was the already been restructured before the application of the FAs. 2019 amendments to the Banking Law, which provided the legal ground necessary to incentivize creditors to engage in • Provisional Article 32 in the Banking Law was designed to restructuring negotiations under the FAs. BRSA’s Restructur- be a temporary measure and remain in force for only two ing Regulation was a pertinent attempt to encourage banks years, so firms could cope with the effects of the 2018 cur- to pursue restructuring activities, but it also lacked the nec- rency devaluation. An extension of two additional years essary elements to encourage banks to embrace the FAs was possible and originally foreseen, and was already con- and therefore to yield the expected results. From that stand- firmed. Considering the current macroeconomic conditions, 43. See section VIII of the Small-Scale FA, BAT 2019, updated July 2021. 44. A survey was circulated by the WBG to Türkiye Garanti Bankası A.Ş., Türkiye İş Bankası A.Ş., Türkiye Vakıflar Bankası T.A.O., T.C. Ziraat Bankası A.Ş., Türkiye Halk Bankası A.Ş., and Akbank T.A.Ş. in June 2021 to collect banks’ views on the practical implementation of the FAs. The data collection process was led by Associate Professor İbrahim Ünalmış from TED University. EQUITABLE GROWTH, FINANCE, & INSTITUTIONS INSIGHT <<< 19 an extension of the application of the FAs after mid-2023 • Under the Large-Scale FA, the period required to suc- may be beneficial, although a legislative amendment to the cessfully complete a restructuring should be 180 days, Banking Law would be required in 2023 to complete the although in some cases it has reached almost a year. This extension. extended period seems like an excessive duration and should be reduced, where possible. The pandemic seems • The 2019 amendments to the Banking Law were critical not to have had a positive impact on the overall duration of only because they introduced benefits and incentives to the process, because online meetings have streamlined restructuring, but also because they triggered a lower rejec- negotiations. tion rate of restructuring applications, which had been an issue in 2018–19. In particular, state-owned banks became more cooperative and supportive of debtor restructurings 4.5 Potential Concerns because of the legal amendments. Although the large volumes of restructured debt suggest their • The grounds justifying rejections after 2019 remain limited flourishing success, some concerns remain with the depth to instances involving bad faith or abuses, including cases and sustainability of FA restructurings. These concerns are in which borrowers had provided false or inaccurate infor- based on three factors. First, feedback collected from banks mation or exaggerated financial difficulties to access the suggests that the restructurings achieved under the FAs have FA procedure to enjoy longer maturities and interest rate fallen short of restructuring debtors’ business operations and reductions. that debt rescheduling remains the norm. This shortcoming • Provision of additional financing by the CCI remains very was also a limitation of the 2002 system.46 Reports from the rare, and no examples have been found of cases in which industry suggest it is only rarely that changes in manage- a majority of creditors had imposed on the minority the ment or in the operations of the debtor are approved as part obligation to grant new funding.45 This general absence of of FA restructurings. This approach may solve the debtor’s additional funding is problematic for the survival of cash- short-term difficulties, but it is unlikely to address the under- strapped borrowers and justifies the granting of grace peri- lying problems that originally caused borrowers to default. ods that borrowers use to strengthen their working capital. Second, concerns around the sustainability of restructurings are exacerbated by the general unavailability of additional • Grace periods are the most common tool adopted by banks financing under the FAs, which is not a shortcoming of the to restructure distressed borrowers. The duration of the FAs but rather a widespread restructuring practice in Türkiye. grace period depends on the viability assessment prepared Without access to additional cash, it is perfectly possible that by the independent expert. Although a grace period’s aver- borrowers’ distress reappears as soon as the grace period is age duration is typically one year, in some cases and if over. Finally, while viability is required under the FA as a con- some borrower-specific conditions exist, banks have pro- dition to enter the restructuring process, it is not a require- vided longer periods that may reach three years. ment at exit—that is, after the restructuring agreement (FRC) • Debt forgiveness is very rare and has not been reported. has been reached. Therefore, a true “affordability” test of This rarity is apparently not due to a lack of incentives or suf- the FRC—determining (a) whether the borrower can comply ficient protections from the embezzlement risk, but rather it with the terms of the FRC and (b) whether the FRC achieves is a result of the strict internal policies that banks must com- the resolution of arrears and a reduction of indebtedness in ply with to accept debt forgiveness, which typically involves the medium term—is not completed in the context of the FA approval from the financial institution’s board of directors. process.47 Reductions in interest payments and penalties, however, are generally more common. 45. Section VII.11 of the Large-Scale FA, 2021, allows the majority of creditors holding at least 90 percent of total debt of the borrower to impose on remaining creditors the obligation to disburse additional financing to the borrower, pro rata to their debt exposure. 46. See World Bank Group, “An Assessment of the Corporate Restructuring Framework in Türkiye,” 2010. 47. An analysis of the “affordability” of the forbearance solution is recommended by international standards. See, for example, ECB (European Central Bank), Guidance to Banks on NPLs (Frankfurt, Germany, ECB, 2017), section 4.4. Such analysis can only be completed when the terms of the FRC are final and have been approved by the CCI. Some insolvency systems require that the court review the “feasibility” of the restructuring plan and determine that it is likely to succeed. This determination does not require a guarantee of success but rather a “reasonable assurance” of success. EQUITABLE GROWTH, FINANCE, & INSTITUTIONS INSIGHT <<< 20 A common defense stated by the industry against the sustain- 4.6 Framework Agreements and the ability of FA restructurings holds that the main causes of cor- porate vulnerability in Türkiye are of a macroeconomic nature. Insolvency Law In other words, the financial difficulties experienced by firms The success of the FAs, and of out-of-court restructuring are explained by the effects of the currency devaluation, which more generally, is partially explained by the features of Tür- can be considered an exogenous event that does not require kiye’s insolvency law, which operates as the “fallback option” deep operational restructuring. Under this approach, most of to informal restructurings: while negotiations are ongoing, the the firms restructured were only “temporarily distressed” but parties know that failure to reach an agreement will trigger the otherwise perfectly viable, and therefore the provision of grace start of formal insolvency proceedings, and for this reason the periods and rescheduled maturities would allow them to con- parties should be aware of the treatment they will receive in tinue reimbursing debt at maturity. This approach is further that scenario. In this sense, informal restructurings are always reinforced by the effects of a high inflationary context, which negotiated “in the shadow of the law.”51 makes debt more affordable over time, especially in a context of real negative interest rates.48 In Türkiye, the formal insolvency regime has traditionally been perceived as in need of improvement, especially for the interests Additionally, the classification of FA-restructured loans under of financial institutions. Among other shortcomings, formal the Stage 2 category could also raise concerns. As explained procedures have been considered protracted and of limited earlier, the FAs foresee a standstill of 180 days during which success, with piecemeal liquidations being the norm.52 Perhaps the borrower is not expected to make any payments while a re- paradoxically, these inefficiencies have had a positive impact structuring is being negotiated. However, it is not uncommon for on the effectiveness of the FAs, because financial institutions the FA restructuring process to take longer and the moratorium have had a strong incentive to avoid insolvency procedures in to remain in place for nine months, especially in those cases in- the EBC and have prioritized reaching an agreement with the volving the restructuring of a corporate group.49 This extended debtor informally. The mutually agreed-on rules of the FAs have period implies that, by the time a restructuring is agreed on, the therefore provided an ideal opportunity for financial institutions exposure should in theory be classified as nonperforming un- to bridge the gaps existing in the formal restructuring framework. der the days-past-due criteria under the BRSA’s classification Despite this positive effect, it would still be strongly advisable rules, because the borrower has not made payments in more that the insolvency legal framework be updated in Türkiye than 90 days. No official data are available confirming the pru- to address the needs of distressed borrowers whose debt dential classification applied to FA-restructured loans, but most cannot be restructured under the FAs, and more specifically, financial institutions seem to report restructured loans, includ- to provide specific protections to informal restructurings once ing FA-restructured loans, as Stage 2.50 In such cases, the FAs formal proceedings are opened. In this regard, the Ministry of may have led to underreporting, which in turn allows financial Justice has been working for several years on the enactment institutions to minimize provisioning obligations. of a new EBC that will modernize in-court insolvency and debt enforcement procedures. 48. Inflation allows borrowers to reimburse lenders with funds that are worth less than they were worth when originally borrowed. This is particularly the case in Türkiye, where real interest rates were negative in 2021. Inflation in Türkiye stood at 19.6 percent as of December 2021, while official interest rates stood at 14 percent as of the same date. 49. This lengthened process was confirmed by the financial institutions interviewed by the WBG in 2021–22. 50. As of September 2021, 52.8 percent of Stage 2 loans in the six largest Turkish banks were restructured loans. 51. See Garrido, “Out-of-Court Debt Restructuring,” 16. 52. Until 2018, the most widely used insolvency procedure in Türkiye was the postponement of bankruptcy, a court-supervised procedure that allowed the debtor to remain in possession of the business and unilaterally extend judicial procedures for up to five years. When this procedure was abolished in March 2018, the concordat procedure, as amended, became the default option for insolvent borrowers. This procedure allows the debtor to extend the automatic stay for up to 23 months. EQUITABLE GROWTH, FINANCE, & INSTITUTIONS INSIGHT <<< 21 5. >>> Conclusion The FAs have proven to be efficient tools for dealing with the debt of the borrowers who face temporary financial distress. As of December 2021, 249 distressed companies and loans of TRY 72 billion, representing 24.5 percent of total restructured loans, have been successfully restruc- tured, thanks to the introduction of the FAs. Perhaps more importantly, the FAs have reinforced an already-existing rescue culture among banks, which have relied on the principles of cooperation and coordination embedded in the FAs to also restructure debts outside their scope. The intro- duction of the FAs has certainly contributed to post-pandemic NPL levels staying moderate (3.16 percent as of December 2021), although Stage 2 loans have drastically increased since 2018, partially as a result of the FAs. The FAs’ success remains limited to large corporate restructurings, however, and concerns remain over the classification and sustainability of FA restructuring. It will be necessary to track the performance of restructurings under FAs to assess whether borrowers comply with restruc- turing plans. Ultimately, the FAs remain the most successful implementation of an enhanced re- structuring procedure since the East Asian Financial Crisis, and they have contributed positively to mitigation of spillover effects associated with the 2018 currency crisis and the COVID-19 pandemic. Compared with other recent experiences with workout models, including enhanced and hybrid workouts, the FAs have resulted in a greater success both in terms of debt volumes and number of firms restructured than in other countries where similar initiatives were intro- duced. Additionally, they have promoted NPL resolution without compromising public funds, unlike AMCs or credit enhancement schemes recently introduced in the European Union. Going forward, the FAs will continue to play a critical role in addressing the renewed stress on Türkiye’s corporate sector posed by the 2021–22 devaluation of the lira, the inflationary environment, and the impact of geopolitical tensions. EQUITABLE GROWTH, FINANCE, & INSTITUTIONS INSIGHT <<< 22