Financial sector in Turkey

The Central Bank of the Republic of Turkey (Türkiye Cumhuriyet Merkez Bankası) was founded in 1930, as a privileged joint-stock company. It possesses the sole right to issue notes. It also has the obligation to provide for the monetary requirements of the state agricultural and commercial enterprises. All foreign exchange transfers are exclusively handled by the central bank. The bank has 25 domestic branches, as well as branches in New York, London, Frankfurt, and Zurich.



Originally established as the Ottoman Stock Exchange (Dersaadet Tahvilat Borsası) in 1866, and reorganized to its current structure at the beginning of 1986, the Istanbul Stock Exchange (ISE) is the sole securities market of Turkey.[39] During the 19th and early 20th centuries, Bankalar Caddesi (Banks Street) in Istanbul was the financial center of the Ottoman Empire, where the headquarters of the Ottoman Central Bank (established as the Bank-ı Osmanî in 1856, and later reorganized as the Bank-ı Osmanî-i Şahane in 1863)[40] and the Ottoman Stock Exchange (1866) were located.[41] Bankalar Caddesi continued to be Istanbul's main financial district until the 1990s, when most Turkish banks began moving their headquarters to the modern central business districts of Levent and Maslak.[41] In 1995, the Istanbul Stock Exchange moved to its current building in the Istinye quarter.[42] The Istanbul Gold Exchange was also established in 1995. The stock market capitalisation of listed companies in Turkey was valued at $161,537,000,000 in 2005 by the World Bank.[43]

Maslak financial district in Istanbul.

In 1998, there were 72 banks. In late 2000 and early 2001 a growing trade deficit and weaknesses in the banking sector plunged the economy into crisis. There was a recession followed by the floating of the lira. This financial breakdown brought the number of banks to 31. Currently more than 34% of the assets are concentrated in the Agricultural Bank (Ziraat Bankası), Housing Bank (Yapı Kredi Bankası), Isbank (Türkiye İş Bankası) and Akbank. The five big state-owned banks were restructured in 2001. Political involvement was minimized and loaning policies were changed. However, over-staffing remains a problem.[citation needed] There are also numerous international banks, which have branches in Turkey. A number of Arabian trading banks, which practice an Islamic banking, are also present in the country.

Government regulations passed in 1929 required all insurance companies to reinsure 30% of each policy with National Reinsurance Corp.[citation needed] In 1954, life insurance was exempted from this requirement. The insurance market is officially regulated through the Ministry of Commerce.


Levent financial district in Istanbul.

After years of low levels of foreign direct investment (FDI), in 2007 Turkey succeeded in attracting $21.9 billion in FDI and is expected to attract a higher figure in following years.[44] A series of large privatizations, the stability fostered by the start of Turkey’s EU accession negotiations, strong and stable growth, and structural changes in the banking, retail, and telecommunications sectors have all contributed to the rise in foreign investment. Turkey has taken steps to improve its investment climate through administrative streamlining, an end to foreign investment screening, and strengthened intellectual property legislation. However, a number of disputes involving foreign investors in Turkey and certain policies, such as high taxation of cola products and continuing gaps in the intellectual property regime, inhibit investment. Turkey has a number of bilateral investment and tax treaties, including with the United States, that guarantee free repatriation of capital in convertible currencies and eliminate double taxation.[citation needed]

In recent years the economic situation has been marked by erratic economic growth and serious imbalances. Real GNP growth has exceeded 6% in many years, but this strong expansion has been interrupted by sharp declines in output in 1994, 1999, and 2001. Meanwhile the public sector fiscal deficit has regularly exceeded 10% of GDP - due in large part to the huge burden of interest payments, which in 2001 accounted for more than 50% of central government spending - while inflation has remained in the high double digit range.[citation needed]
Since 2003, the inflation has lowered to single digits, and the economy is showing an average growth of 7.8%, between 2002-2005. Fiscal deficit is benefiting (though in small amount) from large industry privatizations. Banking came under stress beginning in October 2008 as Turkish banking authorities warned state-run banks against the pullback of loans from the larger financial sectors [45].

In recent years, the chronically high inflation has been brought under control and this has led to the launch of a new currency, the "New Turkish lira", on January 1, 2005, to cement the acquisition of the economic reforms and erase the vestiges of an unstable economy.[46] On January 1, 2009, the New Turkish lira was renamed once again as the "Turkish lira", with the introduction of new banknotes and coins. Etiketler: agricultural sector, effect of the global financial crisis, finacial sector, in turkey, turkey