Turkey moved to minimize the financial fallout from a sharp drop in tourism by creating new rules to govern the $17 billion that local hospitality firms owe the banks.

Until the end of the year, banks will be able to restructure loans granted to tourism businesses twice before declaring them non-performing, according to the measure published today in Turkey’s Official Gazette.

Turkey’s tourism industry, which accounts for 5 percent of gross domestic product, is suffering low visitor numbers following a series of terrorist attacks in major cities. The new bank regulations will staunch the rise of non-performing loans and protect hotels from bankruptcy, Oyak Securities’ Alpay Dinckoc wrote in a note to clients.

The industry may face a downturn lasting two or three years, Hakan Ates, chief executive officer of Denizbank AS, said in an interview in March. The Turkish lender owned by Russia’s Sberbank, has the largest share of loans to Turkish tourism companies.

The drop in numbers has been compounded by a dispute between Turkey and Russia over the war in Syria that’s resulted in numbers of Russian tourists falling by more than half, according to the latest available data. In 2014, they accounted for 4.5 million visitors.

Turkish foreign tourist arrivals fell 10 percent year-on-year in February, the most in a decade, according to the Culture and Tourism Ministry. Moody’s on Wednesday predicted that non-performing loans in Turkey would rise to their highest level in more than five years.

Loans to the tourism industry have been a matter of “hot debate” as visitor numbers fall, according to analysts at Istanbul’s Garanti Securities. The regulator’s decision “will alleviate some of these concerns, in our view, and is positive for the banking sector.”

©2016 Bloomberg L.P.

This article was written by Isobel Finkel from Bloomberg and was legally licensed through the NewsCred publisher network.

Tags: tourism, turkey
Photo Credit: A man using a selfie stick and one using an iPad to take pictures at the Ayasofia Museum in Istanbul. Skift