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The Turkish banking environment helped attract more than US$ 6 billion in foreign capital in 2005. The sector needs to grow at 8 percent over the period 2005-2020 with assets of US$ 790 million in order to correct weak financial intermediation and private sector credit corresponding to just 21 percent of GDP. |
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Finance & banking system |
There were 47 banks operating in Turkey as of January 2006, compared to 50 in 2003: 35 commercial banks with total assets of US$ 296 billion and US$ 111.7 billion in cash loans. The five largest banks have a market share of more than 60 percent, the foremost being the public agricultural bank Ziraat Bankasi, with 22 billion dollars in loans. After the financial crisis of 2000-2001, an extensive consolidation plan, the Banking Sector Restructuring Program, was started by the BRSA, based on the following main actions: (1) restructuring of state banks, (2) prompt resolution of SDIF banks, (3) strengthening of private banks, and (4) strengthening of the regulatory and supervisory framework by setting up a supervisory authority for the regulation of banks (BRSA). Ziraat Bank and Halk Bank, the two main State banks, were restructured and recapitalised in 2004 in preparation for their privatisation.
The legal environment of Turkey’s financial market, altered and unified by adoption of law n°5387 of 1 October, 2005, will be addressed in a second phase. Responsibility for regulation and monitoring of financial companies, leasing and factoring companies, and loan co-operatives was transferred to the agency for the regulation and monitoring of the banking environment (BDDK). Minimum capital equity requirements for banks were raised by 50 percent and governance criteria were strengthened. The BRSA and the Central Bank are preparing a new framework of requirements for capital equity and the Cooke ratio based on the criteria of Basle II. Under the terms of this legislation, any bank operating in Turkey must be a joint stock company, with minimum capital of 20,000 billion Turkish Lira (approximately US$ 1.42 million). Foreign banks can operate in Turkey either by establishing branches or subsidiary companies or by entering into joint ventures with existing banks. It is not currently possible to set up offshore banks.
Established in 1985, the Istanbul Stock Exchange (ISE) is one of the most important emerging stock markets, with trading in a wide range of securities such as stocks, exchange funds, government bonds, Treasury bills, money market instruments, corporate bonds, and foreign securities. Market capitalisation went up from 26.5 percent of GDP in 2003 to 30.6 percent of GDP in 2004 and 45 percent of GDP in 2005, worth US$ 162.8 billion. 304 companies are quoted, including 282 on the national market where the main stocks are posted. 100 companies selected from among the listed companies on the national market make up the ISE National 100 Index, the main index; other indexes are IMKB-50 and IMKB-30. The bond market is dominant in Istanbul, in fourth place worldwide in terms of annual volume traded on the stock exchange. The bond market lists only government debt securities, representing US$ 246.8 billion at the end of 2005, but only part of domestic debt (US$ 182.4 billion) is negotiable (US$ 126.2 billion). The ISE International Market (ISE IM) has been established in the ISE International Securities Free Zone, operating in a tax-free environment. The ISE International Market’s objectives are to encourage the flow of international capital to the ISE and to provide a transparent and secure trading environment for securities issued on international markets. In an environment of entirely free mobility of funds, prices are determined freely and competitively, thereby raising the liquidity and diversity of investments. |
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