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The Turkish Banking Sector - Challenges And Outlook In Transition To Eu Membership

Author

Listed:
  • Steinherr, Alfred

    (European Investment Bank)

  • Tukel, Ali

    (Bogazici University)

  • Ucer, Murat

    (EuroSource)

Abstract

The paper explores the readiness of the Turkish banking sector for integration into the European Union. We address the issue from four different angles. First, we review the present structure and health of the sector, including the state of the regulatory framework, providing where possible a comparative perspective with the larger EU accession countries. Second, we look at the sector's financial solidity in 2003, with a view to gauging its readiness to adapt to a more challenging banking environment. Third, we look at the present obstacles to financial deepening and identify the most pressing issues that seem to hinder the sector's growth. Fourth, we explore issues of productivity and efficiency in the sector. In a final section, we ask the question of whether the Turkish banking sector is or will be ready in due time for EU accession and formulate some policy recommendations. We conclude that in 2004 the Turkish banking sector compares well with those of the new members of the EU. The major source of financial instability in the past was macroeconomic instability and government involvement. At present Turkey is closer to achieving macro-stability than ever in the past, and the government is reducing its direct involvement. Major strides have been accomplished after the crisis of 2001 in cleaning up a very nontransparent and politicized banking environment and in upgrading the regulatory structure to EU standards. Clearly, the job is not finished yet, with the challenge of introducing risk-management based on Basle II and of bringing the capital market to EU standards. Further consolidation and mergers with foreign partners will be inevitable. Should EU integration become a concrete vision of the future, macro stability has great chances to become rooted in Turkey and the banking sector will quickly move to EU standards, long before any accession date.

Suggested Citation

  • Steinherr, Alfred & Tukel, Ali & Ucer, Murat, 2004. "The Turkish Banking Sector - Challenges And Outlook In Transition To Eu Membership," Economic and Financial Reports 2004/2, European Investment Bank, Economics Department.
  • Handle: RePEc:ris:eibefr:2004_002
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    References listed on IDEAS

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    1. Cheryl W. Gray & Arnold Holle, 1997. "Bank-led restructuring in Poland (II): bankruptcy and its alternatives," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 5(1), pages 25-44, May.
    2. Bonin, John P. & Hasan, Iftekhar & Wachtel, Paul, 2005. "Privatization matters: Bank efficiency in transition countries," Journal of Banking & Finance, Elsevier, vol. 29(8-9), pages 2155-2178, August.
    3. H. Brouwer & R. de Haas & B. Kiviet, 2002. "Banking sector development and financial stability in the run up to EU accession," MEB Series (discontinued) 2002-6, Netherlands Central Bank, Monetary and Economic Policy Department.
    4. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series,in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Se (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084 Central Bank of Chile.
    5. Henk Brouwer & Ralph de Haas & Bas Kiviet, 2002. "Banking sector development and financial stability in the run up to EU accession," Macroeconomics 0209003, University Library of Munich, Germany.
    6. Panicos Demetriades & Svetlana Andrianova, "undated". "Finance and Growth: What We Know and What We Need To Know," Discussion Papers in Economics 03/15, Division of Economics, School of Business, University of Leicester.
    7. Cheryl W. Gray & Arnold Holle, 1996. "Bank-led restructuring in Poland: the conciliation process in action 1," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 4(2), pages 349-370, October.
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    Cited by:

    1. Aysan, Ahmet Faruk & Ceyhan, ┼×anli Pinar, 2008. "What determines the banking sector performance in globalized financial markets? The case of Turkey," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(7), pages 1593-1602.
    2. repec:wsi:medjxx:v:05:y:2013:i:02:n:s1793812013500144 is not listed on IDEAS

    More about this item

    Keywords

    Banking sector; European Union; integration; Turkey; regulatory framework;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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