BANKING AND FINANCE

The Turkish banking system is based on a universal model. Banks operates in accordance with international rules and most of the services in relation to money and capital markets are performed by the banks.

As end of 1999, there were 81 banks operating in Turkey with approximately 7691 branches, excluding the Central Bank, of which 62 were commercial and 17 were development and investment banks. Of the 58 privately owned commercial banks, 39 were domestically owned and 19 are owned by foreigners or are branches of foreign banks.

In 1999, the total assets of the banking system grew by 14 percent reaching USD 113.5 billion. The ratio of total assets to GNP increased from 69 percent to 92 percent. In total assets, the share of state owned banks was 35 percent and share of privately owned banks was 49 percent. The share of deposit in liabilities was 67 percent for sector. Due to the increase in external borrowing the share of funds borrowed from abroad in the balance sheet total increased as well. The total loss of the banking system in 1999 was USD 566 million. The total current year loss of the banks amounted to USD 4.7 billion.

Banking Law was amended twice in June and December 1999 and well adjusted to international regulations, BIS recommendations and European Union banking directives. The new arrangements aimed at increasing the efficiency of supervision of the banking sector:

• The requirements of bank foundation were made more demanding.
• The unfair arrangements differentiating public and private banks were abolished.
• Loan definition was made closer to the definition of European Union directives, and equity participation were subjected to same limits as loans.
• Meanwhile definition of large exposure was introduced, the relation between the related group loans and capital was redefined and narrowed.
• Establishment of risk management system and preparation of financial statements on a consolidated basis became compulsory for the first time.
• Supervision according to consolidated financial statements was introduced. The powers of the supervision authorities in dealing with banking problem banks were broadened.
• Personal responsibilities of banks' managers shareholders were increased.
• Administrative fines were introduced for regulatory offences, and juridical fines were highly increased.
• An independent Banking Regulation and Supervisory Agency was established and authorized to regulate and audit banking operations, to take necessary measures on banks.