A senior Turkish banker, at breakfast in the courtyard of Istanbul's most famous prison - now the Four Seasons Hotel - considers the banking sector's addiction to the government securities market. "It's like a Prozac pill," he says, attacking a brioche in the brilliant October sunshine.
Even after depreciation against the dollar, three-month Turkish treasury bills can yield a 30% annual return. This has been going on since 1985, with a brief blip in 1994 when the lira fell 85.8% in 10 weeks including a 38% dip over two days. Even then those holders of T-bills who didn't panic made money.
Why bother with corporate lending and consumer banking when even a small bank can borrow dollars, buy treasury bills, repo them out to customers, and rake in a healthy return? Especially since the government insures all bank deposits 100% - something it was forced to do after the 1994 crisis. "The banking system has lost some of its talent to do real banking," says the banker, brushing away a marauding wasp.
The 1994 blip at least showed responsible banks that the T-bill game cannot last for ever.