Turkish banks have become the debt-raising branch of the government. Estimates suggest that between 40% and 50% of the total assets of the banking system are treasury bonds denominated in Turkish lira or Eurobonds. This ratio is in reality larger than it appears because the bulk of banks' assets are not cash but real estate and shares in non-bank affiliates. Loans to businesses constitute no more than 15% to 20% of assets, according to Global, an Istanbul-based securities company.
Akbank, Turkey's most profitable bank, is a good example. Its total assets in 2002 were TL25 trillion ($15 billion). Of this, 49% was invested in government paper. Loans were TL6 trillion, less than a quarter of assets. In the two state banks, Ziraat and Halk, investments in government paper were an astounding 56% and 73% respectively at the end of the third quarter of 2002.
Borrowing rate inflation Hayri Culhaci, an Akbank executive vice-president, says that there is no way loans to the private sector will grow so long as the economy is depressed and the government's borrowing requirement remains overpowering. "You know that most of the companies that want to borrow are those that will not be able to pay," he says, because the economy has been in turmoil since 1999.