Banks face up to survival tests

Euromoney Limited, Registered in England & Wales, Company number 15236090

4 Bouverie Street, London, EC4Y 8AX

Copyright © Euromoney Limited 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Banks face up to survival tests

The Turkish banking system is well on the way into restructuring and consolidation that optimists argue will make for a lucrative investment story. State banks are rationalizing – and taking a smaller share of the market – and the way in which private banks will be recapitalized by the treasury will mean that the weakest – half of them – won’t survive unless they merge.

The 1990s will be remembered as the decade when Turkish politicians and their protégés pillaged the banking sector with a gusto that drove the country to the brink of bankruptcy.


The full amount siphoned out of state and private banks will probably never be known. Credit rating agency Fitch estimates that public-sector debt from bank restructuring stood at $49.6 billion in June last year - 39% of GDP. This is on a similar scale to Korea and Chile. However, Turkey's deficit resulted more from political meddling with state banks, which dominated, than to poor lending strategies such as those that prompted bank crises in Asia and Latin America.


How to deal with the situation is rapidly leaving the realm of economics: in a country where some politicians break the law themselves and offer lawbreakers protection, how do courts deal with wrongdoers?


A judicial impasse has arisen over what to do with bank shareholders who, through incompetence or asset stripping or a combination of the two, allowed their banks to go bankrupt.


Since the end of 1999 the government has been obliged to take over 19 banks, about one-third of the total, when they ran out of reserves.





Gift this article