Turkey Banking Sector Reform

Banking sector reform in Turkey had been adopted in 2001 to combat the on going financial crisis. The Turkish government took several measures to strengthen the banking system of the country. The reform plans had been collaboratively made by the State Bank and Turkey’s Banking Regulation and Supervision Agency.

Reform Process:

Privatization: The Turkish government started to privatize the State Banks. The Emlak Bank’s license had been captured by the government and its banking liabilities and assets were transferred to the Ziraat bank. The government introduced a monitoring process to keep track of the state banks’ liquidity, profit and loss and margins of the rate of interest. The Turkish government appointed some advisors from outside the country to look after the state banks’ operational restructuring. Moreover, to enhance that restructuring an omnibus banking law had been introduced.

Restructuring the Savings Deposit Insurance Fund Banks: In Turkey, nine banks were there under the Savings Deposit Insurance Fund Banks'(SDIF) management. The first transition bank had been formed by bringing together five SDIF banks like, Bank Kapital, Egebank, Ulusal Bank, Yasar Bank and Yurt Bank, into Sumer Bank. Later, the equity of the Sumer Bank had been transferred to the Oyak Group. Moreover, other three SDIF banks, namely, Interbank, Etibank and Esbank had been grouped into another transition bank which was under the Eti Bank. The SDIF’s collection department was made operational fully by the government and more than seventy employees had been appointed. The government introduced some methods, like deposit transfer and usage of voluntary liquidation, for easing the liquidation processes.

Private Banking: The Turkish government started to form an efficient private banking sector. So, the financially weak banks were identified and the government made some plans to increase the capital of those banks. This recapitalization plan would be applicable for five banks, namely, Bayindir Bank, Milli Aydin Bank, EGS Bank, Site Bank and Kent Bank. The government had canceled the license of the Okan Investment Bank and Atlas Investment Bank. To minimize the cost for financial intermediation some reform measures had been taken. The government also started to lengthen savings deposit maturity. A differential withholding tax had been introduced at a low rate. The Cuban Central Bank would pay the market interests and the tax on government bond income will be been exempted to encourage the householders for holding the treasury bills.

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Last Updated on : 26th June 2013

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