Financial Services 

Turkey’s financial sector is still in the development stage, with financial services ready for further expansion, driven by solid economic growth along with declining interest rates and inflation. According to the Turkish Banking Regulation and Supervision Agency (BRSA), the Turkish financial sector increased by approximately 20 percent of CAGR between 2002 and 2010. As regards asset sizes, 77 percent of the assets belong to the banks, meaning that the sector is dominated by the banks. The Turkish insurance sector is also developing rapidly with 25 percent of CAGR during 2002-2010, and has gained new momentum after the social security reform that has introduced universal health insurance.

• Turkey’s financial market is highly liberalized.
• Turkey’s regulatory bodies have improved steadily since 2001, and the economy has become resilient to both domestic and external financial fluctuations.
• The Central Bank of the Republic of Turkey (CBRT) has effective instruments for managing liquidity and flexibility to provide emergency lending assistance.
• Despite the global financial crisis, Turkey’s banking sector remains sturdy and profitable.
• Turkey’s financial institutions were not exposed to “toxic assets” caused by the financial crisis.
• The banking sector had a sound capital adequacy ratio of 19 percent in 2010, far above the legal limit of 8 percent.
• The household liability ratio to GDP was 17 percent in 2010, while it was 66 percent in the Euro area.
• The Istanbul Stock Exchange (ISE) only began its operations in 1986, but it grew quickly to become one of the top emerging market exchanges of the world.
• According to the BRSA’s 2010 statistics, Turkey’s ISE 100 index grew by 26 percent in terms of US dollars and 28 percent in terms of local currency as compared with 2009.
• Foreign and local investors are equally treated and there are more than 20 banks with foreign capital.
• According to ISE, more than 60 percent of the total value of the traded stocks is held by foreign investors as of October 2011.
• The Istanbul Financial Center Project is set to make Istanbul a regional financial center within ten years and a global center in a few decades.
• The Turkish government is constantly working to improve the Turkish tax system, legal and fiscal environment, political and economic stability and regulatory framework in order to attract financial investments.
  

Strengths Nationwide branch network and distribution channels Strong capital adequacy of Turkish Banks Strong liquidity in banks Availability of a large and well-trained workforce Robust regulatory framework		Weaknesses Turkey’s dependence on short-term capital inflows prevents aggressive reduction in interest rates Low GDP per capita held back the growth of insurance

Opportunities Introduction of mortgage loans and derivative instruments Increasing loan-to-deposit ratio Privatization of three large state banks Low penetration ratio in the insurance sector		Threats Increasing NPLs, particularly in consumer loans and credit cards Short term deposit base Access to syndication and securitization credits from international institutions became more difficult Dubai international financial market becoming a competitor Leasing: VAT increase from 1% to 18% on leasing transactions