NOTES
- 2001 . Boğaziçi Journal: Review of Social, Economic and Administrative Studies , 15 ( No.1 ) : 13 – 23 . Profitability is a hotly debated issue in the Turkish banking sector, and there are those who claim that profitability is high at the surface but, when corrected for inflation, it comes down drastically. That it comes down is true, but it is still very high indeed by international standards. For a more detailed exposition of the issue, see Osman Cevdet Akcay, Refik Erzan, and Reha Yolalan, “An Overview of the Turkish Banking Sector,”
- For profitability measures for selected Organization for Economic Cooperation and Development (OECD) countries during the mid-1990s, see Table 1
- 2000 . For a detailed analysis of efficiency in the banking sector in the pre-crisis period, see Muhammet Mercan and Reha Yolalan, “The Effects of Financial Liberalization and New Bank Entry on Market Structure and Competition in Turkey,” unpublished manuscript
- NIM = net interest income/total assets
- Connected lending corresponds to lending done to group companies, i.e., to companies that belong to the group that is also the main shareholder of the bank
- Despite the recent entry of HSBC through its acquisition of Demirbank and that of Uni Credito in the form of a 50/50 partnership with KoçFinancial Services, Turkey still lags substantially behind the other emerging markets
- 1999 . On the nature of the International Monetary Fund (IMF) “Stand by Arrangement,” see The Undersecretariat of Treasury, Prime Ministry, The Turkish Republic, stand-by Arrangement—Letter of Intent, Turkey, Dec. available from the Turkish Treasury's website, <http://www.treasury.org.tr>
- 2000 . Turkey IMF . For a detailed and critical investigation of this issue, see IMF, Country Staff Report,(Feb. IMF, International Capital Markets: Prospects and Key Policy Issues (IMF, Sept. 2000)
- The float regime that has been in effect since the collapse of the first program has exactly the opposite set up: the exchange rate freely floats while the Central Bank controls the interest rate
- Maturity mismatch means taking long-term positions in TL-denominated assets while funding them through short-term TL liabilities such as deposits and repos. As long as the T-bill rates remain above the short-term funding rates the holder enjoys a positive return on the asset but remains vulnerable to hikes in funding costs until maturity
- Short positioning in foreign currency basically involves borrowing in foreign exchange, converting to local currency, investing in local currency-denominated assets, selling at or before maturity, converting back to foreign currency, paying back the loan, and hopefully enjoying a high return in local and foreign currency terms. A dirty or highly managed float system renders the practice fairly lucrative due to the absence of severe depreciation or devaluation
- 2002 . For a detailed analysis and elaboration of the recent crises, see Fatih Özatay and Güven Sak, “The 2000–2001 Financial Crisis in Turkey,” Paper presented at the Brookings Trade Forum 2002: Currency Crises, Washington DC, May
- Stop-loss levels are predetermined levels for the market value of bonds (thus for interest rates as well), such that, when hit, an automated sell-off process is initiated
- Tier 1 capital is basically paid-up capital and legal reserves. Tier 2 capital is supplementary capital in the form of fixed asset revaluation funds, provisions for revaluation of fixed assets of subsidiaries and affiliates, and subordinated debts. Turkish banks benefited greatly from the revaluation of fixed assets, and capital adequacy requirement was mostly fulfilled through Tier 2 capital. The system is still short of Tier 1 capital, and the questionability of standards of capital adequacy mentioned in the main text was implicative of this deficiency and the leniency of the regulatory authority in this regard
- 2001 . 13 – 23 . For a comprehensive investigation of the Turkish Banking Sector, see Akcay, Erzan, and Yolalan