The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

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. However, Turkey's deficit resulted more from political meddling with state banks, which dominated, than to poor lending strategies such as those that prompted bank crises in Asia and Latin America.

How to deal with the situation is rapidly leaving the realm of economics: in a country where some politicians break the law themselves and offer lawbreakers protection, how do courts deal with wrongdoers?

A judicial impasse has arisen over what to do with bank shareholders who, through incompetence or asset stripping or a combination of the two, allowed their banks to go bankrupt.

Since the end of 1999 the government has been obliged to take over 19 banks, about one-third of the total, when they ran out of reserves.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree