If, by a miracle, inflation comes down in Turkey the sector most likely to be affected is banking, the business that has benefited from it and been shaped by it most. The Turkish banking sector shows many of the characteristics of the high inflation period in Latin America and will probably follow the same evolutionary path once economic stability prevails over near-chaos. This, according to a recent report by JP Morgan, is the same as the one mapped out by Darwin: survival of the fittest.
If this is the case, many banks will fall by the wayside. Already many of them are sick. Multinational companies and large Turkish corporations do business with only about a third of the 38 privately owned commercial banks. The rest are considered to be too small, shaky or both to deal with. More than a dozen banks have government officials on their boards to prevent them from going under; Interbank and Turkbank were seized by the central bank when on the brink of collapse.
"Turkish banks operate under unique operating conditions," says a report by Credit Lyonnais Securities.