Turkish Banking: Banking Under Political Instability and Chronic High Inflation (Palgrave Macmillan Studies in Banking and Financial Institutions)

237 Pages·2009·0.9 MB·English

by  Alper Kara

PalgraveMacmillanStudiesinBankingandFinancialInstitutions
SeriesEditor:ProfessorPhilipMolyneux
ThePalgraveMacmillanStudiesinBankingandFinancialInstitutionsisinterna-
tionalinorientationandincludesstudiesofbankingwithinparticularcountries
orregions,andstudiesofparticularthemessuchasCorporateBanking,RiskMan-
agement,MergersandAcquisitions,etc.Thebooksfocusonresearchandpractice,
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Titlesinclude:
YenerAltunbas¸,BlaiseGadaneczandAlperKara
SYNDICATEDLOANS
AHybridofRelationshipLendingandPubliclyTradedDebt
YenerAltunbas¸,AlperKaraandÖzlemOlgu
TURKISHBANKING
BankingunderPoliticalInstabilityandChronicHighInflation
ElenaBeccalli
ITANDEUROPEANBANKPERFORMANCE
SantiagoCarbó,EdwardP.M.GardenerandPhilipMolyneux
FINANCIALEXCLUSION
AllessandroCarretta,FrancoFiordelisiandGianlucaMattarocci(editors)
NEWDRIVERSOFPERFORMANCEINACHANGINGWORLD
ViolaineCousin
BANKINGINCHINA
FrancoFiordelisiandPhilipMolyneux
SHAREHOLDERVALUEINBANKING
HansGenbergandCho-HoiHui
THEBANKINGCENTREINHONGKONG
Competition,Efficiency,PerformanceandRisk
ElisabettaGualandriandValeriaVenturelli(editors)
BRIDGINGTHEEQUITYGAPFORINNOVATIVESMEs
MunawarIqbalandPhilipMolyneux
THIRTYYEARSOFISLAMICBANKING
History,PerformanceandProspects
KimioKaseandTanguyJacopin
CEOsASLEADERSANDSTRATEGYDESIGNERS
ExplainingtheSuccessofSpanishBanks
M.MansoorKhanandM.IshaqBhatti
DEVELOPMENTSINISLAMICBANKING
TheCaseofPakistan
MarioLaTorreandGianfrancoA.Vento
MICROFINANCE
PhilipMolyneuxandMunawarIqbal
BANKINGANDFINANCIALSYSTEMSINTHEARABWORLD
PhilipMolyneuxandEleuterioVallelado(editors)
FRONTIERSOFBANKSINAGLOBALWORLD
AnastasiaNesvetailova
FRAGILEFINANCE
Debt,SpeculationandCrisisintheAgeofGlobalCredit
DominiqueRambureandAlecNacamuli
PAYMENTSYSTEMS
FromtheSaltMinestotheBoardRoom
AndreaSchertler
THEVENTURECAPITALINDUSTRYINEUROPE
AlfredSlager
THEINTERNATIONALIZATIONOFBANKS
NoelK.Tshiani
BUILDINGCREDIBLECENTRALBANKS
PolicyLessonsforEmergingEconomies
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Turkish Banking
Banking under Political Instability and
Chronic High Inflation
YenerAltunba¸s
ProfessorofBankingandFinance,BangorUniversity
BusinessSchool,Wales,UK
AlperKara
LecturerinBusinessEconomics,TheBusinessSchool,
LoughboroughUniversity,Loughborough,UK
ÖzlemOlgu
AssistantProfessorinAccountingandFinance,KoçUniversity,
Istanbul,Turkey
©YenerAltunba¸s,AlperKaraandÖzlemOlgu2009
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Altunba¸s,Yener.
Turkishbanking:bankingunderpoliticalinstabilityandchronichigh
inflation/YenerAltunba¸s,AlperKara,ÖzlemOlgu.
p.cm.—(PalgraveMacmillanstudiesinbankingandfinancial
institutions)
Includesbibliographicalreferencesandindex.
ISBN978–1–4039–9711–1(alk.paper)
1. Banksandbanking—Turkey. I. Kara,Alper,1977–II.Olgu,
Özlem,1979-III.Title.
HG3256.5.A6A482008
332.109561—dc22 2008029939
10 9 8 7 6 5 4 3 2 1
18 17 16 15 14 13 12 11 10 09
PrintedandboundinGreatBritainby
CPIAntonyRowe,ChippenhamandEastbourne
Contents
ListofFiguresandTables ix
Preface xiv
ListofAbbreviations xvi
AbouttheAuthors xviii
1 Introduction 1
2 OverviewoftheTurkishEconomy 7
Introduction 7
TheOttomanperiodandtheearlyRepublic 7
State-leddevelopmentstrategy,1930–50 10
Liberalizationinthe1950s 10
Importsubstitutionandinward-orientated
growthstrategy,1960–79 12
Theeraoffinancialliberalization 15
1980–90 15
1990–2000 19
1994economiccrises 21
2000–01twineconomiccrises 24
Recenteconomictrends 27
RenewalofthestandbyagreementwiththeIMF,2005 30
Ashorthistoryofpoliticalinstability 31
Conclusion 37
Appendix2.1 38
Appendix2.2 39
3 TrendsintheBankingIndustry 40
Introduction 40
BankingintheOttomanperiod 41
ThenewRepublicandtheestablishmentof
thenewnationalbanks 42
Theperiodofstate-ownedbanks,1932–45 43
Establishmentofprivatebanks,1945–60 44
Bankingintheplannedeconomy,1960–79 45
Bankingafterfinancialliberalization 47
v
vi Contents
Bankingandfinancialmarketsinthe1990s 50
Aftermathofthe1994crisis 54
EstablishmentoftheBankingRegulationand
SupervisoryAgency 55
Recentdevelopments,2000–06 57
SDIFandtherestructuringprocess 58
Recovery 60
Dollarization,crowding-outbygovernmentdebtand
maturitymismatch 62
Conclusion 64
Appendix3.1 66
Appendix3.2 68
4 AProfileofTurkishBanking 69
Introduction 69
SizeoftheTurkishbankingsector 69
BranchsystemsoftheTurkishbankingsector 73
EmploymentintheTurkishbankingsector 74
PlayersintheTurkishbankingmarket 77
Bigbanks 77
State-ownedversusprivately-ownedbanksinTurkey 78
BalancesheetstructureoftheTurkishbanks 79
Assetsstructure,loansandliquidassets 79
Liabilitystructure,depositsandequity 86
Incomeandcosts 87
IncomestructureofTurkishbanks 87
CoststructureofTurkishbanks 89
PerformanceoftheTurkishbankingsector 90
Capitaladequacy 91
Assetquality 92
Liquidity 93
Profitability 93
Financialstrengthindices 95
Conclusion 96
5 TheTurkishBankingSectorandRegionalEconomicGrowth 97
Introduction 97
Abriefliteraturereview:financialdevelopmentand
economicgrowth 98
Dataandmethodology 102
Economicgrowthandfinancialdevelopmentindicators 103
Contents vii
Resultsanddiscussion 105
Correlationmatrices 105
Regressionresults 106
Conclusion 109
6 PerformanceofBanksinTurkey 111
Introduction 111
Fundamentalsofefficiencyandproductivity 112
Datasources 115
NonparametricefficiencymeasurementofTurkishbanks 118
Dataenvelopmentanalysis(DEA)method 118
Tobitregression:accountingforenvironmentalvariables 122
NonparametricproductivitymeasurementofTurkishbanks 123
DEA–Malmquistindextechnique 127
Empiricalfindings 129
TechnicalefficiencyscoresofTurkishbanks 129
ProductivityscoresofTurkishbanks 134
Conclusion 140
Appendix6.1 143
Appendix6.2 144
Appendix6.3 150
7 OtherFinancialMarketsinTurkey 151
Introduction 151
ThestockmarketinTurkey 151
Initialpublicofferings(IPOs) 157
Bondmarkets 160
PrimarymarketsinTurkey 160
SecondarymarketactivitiesinTurkey 161
Over-the-countermarket 161
ISEbondsandbillsmarket 162
Leasing,factoringandconsumerfinancecompanies
inTurkey 164
Specialfinancialinstitutions 166
Conclusion 167
8 CurrentDevelopmentsandProspectsforTurkishBanks 169
Introduction 169
ReshapingtheTurkishfinancialsystemtowards
potentialEUmembership 169
viii Contents
ImplementationofBaselIIinTurkey 173
Pillar1:Credit,marketandoperationalrisk 174
Pillars2and3 174
CanTurkishbankscopewithBaselII? 175
Introductionofamortgagesystemandanew
mortgagelaw 176
ForeigndirectinvestmentinTurkishbanking 179
Conclusion 184
Appendix8.1 186
9 ConcludingRemarks 191
Notes 195
References 198
Index 210
List of Figures and Tables
Figures
2.1 GrowthrateofTurkey,1924–47 9
2.2 GrowthrateofTurkey,1948–67 11
2.3 GrowthrateofTurkey,1960–79 13
2.4 Growthinexports,1970–2006 18
2.5 Yearlyconsumerandproducerpriceindexes,1983–2006 20
2.6 NetinternationalflowoffundstoTurkey,1975–2006 21
2.7 CentralBank’sgrossforeignexchangereserves,1981–2007 22
2.8 Centralgovernmentdebtstock,1986–2006 23
2.9 Grossnationalproductbyproducerprices,1988–2006 24
2.10 Averagecompoundinterestratesofthebenchmark
governmentsecurity,1990–2007 28
2.11 Compoundyieldof10-yearEurobondsissuedby
theTurkishTreasury,2002–2008 28
2.12 Maturitycompositionofcentralgovernment
outstandingdomesticdebt,2006 29
2.13 CurrentaccountdeficitasapercentageofGNP,1992–2006 30
2.14 Unemployment,1980–2006 31
2.15 Sectoralcompositionofoutstandingforeigndebt,
1996–2006 32
2.A1 Currencydenominationofcentralgovernment
outstandingforeigndebt,2006 38
2.A2 Currencyandinterestcompositionofcentral
governmentoutstandingdebt,2006 38
2.A3 ContributionofsectorstoGNP,1979–2003 39
2.A4 Sectoraldistributionofworkforce,1980–2003 39
3.1 BanksinTurkey,1963 46
3.2 Topfourbanks’liabilitiesasapercentageoftotal
liabilitiesofthebankingsectorinTurkey,1980 48
3.3 Topfourbanks’liabilitiesasapercentageoftotal
liabilitiesofthebankingsectorinTurkey,1990 50
3.4 Totalassetsofbankingsector,1991–1998 53
3.5 Concentrationinthebankingsector 53
3.6 Dollarizationindeposits,1986–2007 63
3.7 Crowding-outbygovernmentdebt,1986–2007 63
ix
x ListofFiguresandTables
3.8 Maturitiesofdeposits,1986–2007 64
4.1 ChangingnumbersofbanksinTurkey,1990–2006 73
4.2 Numbersofbranchesandemployeesinthe
Turkishbankingsystem,1990–2006 76
4.3 SelectedassetitemsoftheTurkishbankingsector,
percentageshareofeachcomponent,1990–2006 81
4.4 TotalassetstoGDPratio,TurkeyandEUcountries,2007 82
4.5 Loanstototalassetsratio,1990–2006 83
4.6 Numberofbankcardsandcreditcards,1998–2005 85
4.7 Non-performingloanstototalloans,1990–2006 85
4.8 Non-performingloans(NPL)andprovisionsto
NPLratios,selectedcountries,2004 86
4.9 TotalliabilitiesofTurkishbanks,1990–2006 87
4.10 IncomestructureoftheTurkishfinancialsystem,
1990–2006 88
4.11 Netinterestincometototalassetsratio,1990–2006 88
4.12 Totalincometototalexpenditureratio,1990–2006 89
4.13 Averageinterestincometoaverageinterestexpenses
ratio,1990–2006 89
4.14 OperatingexpensesofTurkishbanks,2000–06 90
4.15 Averageshareholders’equitytototalassetsratio,
1990–2006 91
4.16 CapitaladequacyratioforTurkeyandselected
EUcountries,2006 92
4.17 Loanstototalassets,1990–2006 92
4.18 Liquidassetstototalassetsratio,1990–2006 93
4.19 Returnonassets(ROA)andreturnonequity(ROE)
ofTurkishbanks,1990–2006 94
4.20 Comparisonofreturnonassets(ROA)andreturnon
equity(ROE),selectedcountries,2004 94
6.1 Thedistinctionbetweenefficiencyandproductivity 114
6.2 ConstructionofaMalmquistproductivityindex 125
6.3 AnnualefficiencyscoresoftheTurkishbankingsector,
1992–2006 130
6.4 AverageDEAefficiencyscoresofTurkishbanks,
1992–2006 132
6.5 DEAefficiencyscoresofDemirbank,Koçbankand
Dıs¸bank,1992–2006 133
6.6 ChangingtrendsofMalmquistdecomposed
components,1993–2006 136