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Cooking with the right ingredients

The Turkish banking sector is undergoing a revolutionary transformation. For decades the playground of crooked bankers and the politicians and bureaucrats they funded, the sector is now being cleaned up.

Since 1999, when the IMF entered the scene, 20 banks have been seized and withdrawn from the market or sold. State banks, which served as private treasuries for politicians and their cronies, have been neutered.

A sector that had become almost as unlawful as the drugs trade is now effectively regulated and supervised. For this Turkey has the much-reviled IMF to thank. The Fund, understanding that money talks loudest when a country is literally bankrupt, followed an effective carrot-and-stick policy. It offered cash against reforms. Funds were made available to the government only after it passed laws listed on its stand-by agreement programme.

The policy worked extremely well. Turkey has pushed through more financial reform laws under the outgoing Bulent Ecevit coalition than at any other time in its history. Many of these were implemented half-heartedly or not all but at least they are in place.

One of the most important laws to have been passed was the banking law. This had to be re-enacted almost as soon as parliament passed it because it contained many loopholes - pierced by politicians who did not want to stop milking the banks.

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