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Assessment of Bail-in for Turkish Banking Sector

Author

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  • Mehmet Buyukkara
  • Ayse Karasoy
  • Muhammed Islami Onal

Abstract

[EN] After the global financial crisis, a new resolution tool, bail-in is introduced by the Financial Stability Board (FSB) to manage the orderly resolution of failing financial institutions. Bail-in is a framework that creditors and shareholders bear the cost of resolution and taxpayers are not exposed to loss. In this article, we analyze the Turkish bail-out and assess the bail-in capacity of the Turkish banking sector considering the public cost caused by 2000-2001 crises as a base scenario. We conclude that bail-inable instruments compared to total liabilities have increased since the beginning of 2000s and they would be enough to protect taxpayers from loss if a similar size of public cost occurs as in 2000-2001 crises. In addition, the scope for the bail-in and the assessment of the resolution authority for the inclusion and exclusion of instruments will also have an effect on the loss absorption capacity of Turkish banks. [TR] Kuresel finansal krizden sonra finansal kuruluslarin sistemli bir sekilde cozumlemeye tabi tutulabilmesi icin Finansal Istikrar Kurulu (FSB) tarafindan yeni bir cozumleme araci olarak icsel cozumleme (bail-in) ortaya konmustur. Icsel cozumlemenin amaci cozumlemede ortaya cikan zararin borc verenler ve hissedarlar tarafindan paylasilmasidir. Bu calismada 2000-2001 krizinin maliyetleri dikkate alinarak ulkemiz bankacilik sektorunun icsel cozumleme kapasitesi incelenmistir. Krizden itibaren icsel cozumleme kapsaminda kullanilabilecek araclarin arttigi ve benzer buyuklukte bir kriz olmasi durumunda bankacilik yukumluluklerinin cozumleme maliyetlerini karsilamada yeterli olabilecegi sonucuna varilmistir. Buna ek olarak, cozumleme otoritesinin icsel cozumleme cercevesine dahil edilecek ve cercevenin disinda birakilacak araclara iliskin degerlendirmesi de bankacilik sektorunun zarar karsilama kapasitesine etkide bulunacaktir.

Suggested Citation

  • Mehmet Buyukkara & Ayse Karasoy & Muhammed Islami Onal, 2016. "Assessment of Bail-in for Turkish Banking Sector," CBT Research Notes in Economics 1624, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    • Handle: RePEc:tcb:econot:1624
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    References listed on IDEAS

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    1. Philipp Bagus & Juan R. Rallo Julián & Miguel A. Alonso Neira, 2014. "Bail-in or Bail-out: The Case of Spain," CESifo Economic Studies, CESifo, vol. 60(1), pages 89-106.
    2. Akyuz, Yilmaz & Boratav, Korkut, 2003. "The Making of the Turkish Financial Crisis," World Development, Elsevier, vol. 31(9), pages 1549-1566, September.
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