Current Developments and Prospects for Turkish Banks

Abstract

In the penultimate chapter we focus on current developments and take a look at the prospects of Turkish banking for the future. Above all, the most important occurrence, not only for Turkish banking but also for Turkey as a nation, was the declaration of Turkey as an EU accession country in 2005. The first section of the chapter reviews the structural and institutional preparations of the Turkish banking and financial system towards meeting EU regulations and systems. Then we switch our attention to the implementation process of newly reinforced capital adequacy directives (Basel II), followed by the readiness for and the impact of the new Basel Accord directives on current levels of capital adequacy of Turkish banks. Subsequently, we discuss the developments in housing loans with the introduction of the Mortgage Law. Potential EU membership, the successful banking sector restructuring programme after the 2000/01 financial crises, the enforcement of internationally accepted banking standards such as Basel II, and the growth potential of the sector, attracted an historical amount of foreign investment to the banking industry. In the final section, we review the recent acquisitions by foreign banks and assess the impact of a large foreign presence on Turkish banking.