Turkish Banking: Banking Under Political Instability and Chronic High Inflation (Palgrave Macmillan Studies in Banking and Financial Institutions) PDF
Preview Turkish Banking: Banking Under Political Instability and Chronic High Inflation (Palgrave Macmillan Studies in Banking and Financial Institutions)
PalgraveMacmillanStudiesinBankingandFinancialInstitutions SeriesEditor:ProfessorPhilipMolyneux ThePalgraveMacmillanStudiesinBankingandFinancialInstitutionsisinterna- tionalinorientationandincludesstudiesofbankingwithinparticularcountries orregions,andstudiesofparticularthemessuchasCorporateBanking,RiskMan- agement,MergersandAcquisitions,etc.Thebooksfocusonresearchandpractice, andincludeup-to-dateandinnovativestudiesoncontemporarytopicsinbanking thathaveglobalimpactandinfluence. 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 PalgraveMacmillanStudiesinBankingandFinancialInstitutions SeriesStandingOrderISBN978–1–4039–4872–4 Youcanreceivefuturetitlesinthisseriesastheyarepublishedbyplacingastand- ingorder.Pleasecontactyourbookselleror,incaseofdifficulty,writetousatthe addressbelowwithyournameandaddress, thetitleoftheseriesandtheISBN quotedabove. Customer Services Department, Macmillan Distribution Ltd, Houndmills, Basingstoke,HampshireRG216XS,England 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 Allrightsreserved.Noreproduction,copyortransmissionofthis publicationmaybemadewithoutwrittenpermission. Noportionofthispublicationmaybereproduced,copiedortransmitted savewithwrittenpermissionorinaccordancewiththeprovisionsofthe Copyright,DesignsandPatentsAct1988,orunderthetermsofanylicence permittinglimitedcopyingissuedbytheCopyrightLicensingAgency, SaffronHouse,6-10KirbyStreet,LondonEC1N8TS. Anypersonwhodoesanyunauthorizedactinrelationtothispublication maybeliabletocriminalprosecutionandcivilclaimsfordamages. Theauthorshaveassertedtheirrightstobeidentifiedasthe authorsofthisworkinaccordancewiththeCopyright,Designs andPatentsAct1988. Firstpublished2009by PALGRAVEMACMILLAN PalgraveMacmillanintheUKisanimprintofMacmillan PublishersLimited,registeredinEngland,companynumber 785998,ofHoundmills,Basingstoke,HampshireRG216XS. PalgraveMacmillanintheUSisadivisionofStMartin’sPressLLC, 175FifthAvenue,NewYork,NY10010. PalgraveMacmillanistheglobalacademicimprintoftheabovecompanies andhascompaniesandrepresentativesthroughouttheworld. Palgrave®andMacmillan®areregisteredtrademarksinthe UnitedStates,theUnitedKingdom,Europeandothercountries. ISBN-13:978–1–4039–9711–1 ISBN-10:1–4039–9711–X Thisbookisprintedonpapersuitableforrecyclingandmadefromfully managedandsustainedforestsources.Logging,pulpingandmanufacturing processesareexpectedtoconformtotheenvironmentalregulationsofthe countryoforigin. AcataloguerecordforthisbookisavailablefromtheBritishLibrary. LibraryofCongressCataloging-in-PublicationData 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
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