Banks face up to survival tests

The Turkish banking system is well on the way into restructuring and consolidation that optimists argue will make for a lucrative investment story. State banks are rationalizing – and taking a smaller share of the market – and the way in which private banks will be recapitalized by the treasury will mean that the weakest – half of them – won’t survive unless they merge.

The 1990s will be remembered as the decade when Turkish politicians and their protégés pillaged the banking sector with a gusto that drove the country to the brink of bankruptcy.

The full amount siphoned out of state and private banks will probably never be known. Credit rating agency Fitch estimates that public-sector debt from bank restructuring stood at $49.6 billion in June last year – 39% of GDP. This is on a similar scale to Korea and Chile.