European Journal of Law and Economics

, Volume 21, Issue 2, pp 179–197 | Cite as

Fraud, banking crisis, and regulatory enforcement: Evidence from micro-level transactions data



Can widespread fraud cause large scale banking crises? We address this issue in the context of the recent Turkish banking crisis of 2000, which was followed by a severe recession and currency crisis. Using detailed micro-level transactions data, we show that related lending and back-to-back loans across banks were used to circumvent regulation and transfer deposits to private holding companies that were ruined. Our evidence suggests that systemic fraud coupled with weak enforcement of conventional regulatory principles can be a source of banking crisis.


Banking crises Regulatory enforcement Related lending Looting Turkey 


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Copyright information

© Springer Science + Business Media, Inc. 2006

Authors and Affiliations

  • H. Bartu Soral
    • 1
  • Talan B. İşcan
    • 2
  • Gregory Hebb
    • 3
    • 2
  1. 1.United Nations Development ProgramUSA
  2. 2.Dalhousie UniversityNova ScotiaCanada
  3. 3.School of Business AdministrationDalhousie UniversityHalifaxCanada

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