(This article was published in the Newspaper of World by Gökhan TAŞPINAR on 10.10.2005 )

The EU, with significant barriers to be hanged for full membership negotiations began, nowadays, the Banking sector will face in the process of adaptation problems and possible solutions should be put out of the sector, the Eu is ready, how much it is important for the assessment of the subject. Turkish Financial The system 90 % of the banking sector, although it's out of crisis has stabilised, although the crisis-sensitive balance of negotiation that may arise in the process of economic and political risks, measurement of well-calculated and the industry at least should aim at the problems. In this context, firstly, the sector is directly related to the fundamental problems of the EU banking sector, by comparison, in the process of adaptation is likely to occur problems will be included.


I.The Basic problems of the Turkish Banking Sector in the EU and Comparison With the Banking Sector

Structural problems in the Turkish banking sector in the EU and comparison with the banking sector, as a result, in the process of negotiating the problems to be solved are given below.Asset size in terms of sector banking in the EU lags behind a lot. in 2004, total asset size of the system, although the previous year, according to a 23 %increase of EUR 168 Billion came to the level of the EU banking sector as of 2003 1.771 Billion Eur on average assets the size is very low. In addition, the EU countries, germany, the asset size of the banks, 2.5 times the gross national product, in the Uk, this ratio is 3.5-fold, while the total asset of the banks in Turkey the ratio of gross national product, only 70 % of to be around the asset size of the Turkish Banking sector is still not at a sufficient level, a striking indication.

The EU banking sector, the average deposit size is 755 Billion EUR in the amount and proportion of Gdp %121 while the Turkish Banking Sector as of 2004, the total volume of deposits of EUR 104 Billion to gross national product and the ratio of 44 %of the level of the course, an indispensable element in the development of the capital the accumulation of our country, how inadequate is an indication that the other is. Sufficient accumulation of capital due to the lack of loans, by sector gross domestic product, rate of 23% (2004), around of the old EU members, this ratio in the banking sector average and 129 %level.

The sector's assets and liabilities, receivables, and debt maturity between incompatibility should not be overlooked. Total deposits 88 %3 months is short-term, given the gravity of the system as short-term debt, especially in the mortgage system of the process of transition that is experiencing these days in the beginning housing loans(%181% increase in real terms) over the long-term credit is used, some of these loans are to come back, motionless. In addition, the sector in the total securities portfolio, 58 %of the 1-year long-term government securities with the formation of the remarkable emerges as an indicator

With the EU mutual financial services liberalisation in the Turkish banking sector to increase competition in the sector due to a drop in profitability, which is not enough competitiveness of small and medium-sized banks ' liquidity problems, to live, and even their disposal will be able to bring. Especially between the years 1999-2003 EU banking sector, approximately 1400 of the bank merger and acquisition transactions have been considering; in the Turkish banking sector in the negotiation process for a consolidation with the movement of the foreign partnership, or merger will take place, inefficient, small and medium-sized banks is pushed out of the system to be estimated. This process; funds of banks in liquidation, merger, sale, and 2 large public bank, started with the merger of TEB-BNP Paribas, Şekerbank-Rabobank, Sitebank-Amendment, Disbank-Fortisbank and Bank Y.kredi-Koçbank as well as foreign partnership/merger operations continue, although medium-sized banks foreign interest groups, and with the privatization of the public banks is estimated to accelerate.

Banking system of EU 33 %of the public banks, the formation (in the Eu, this ratio is 10%), private banks in terms of anti-competitive factors.

Economic development will accelerate, which will prevent the development of the Turkish Banking sector, which is one of the factors in the Bank and Insurance transactions Tax. Such obligation on the system in 2003, the cost of 1 Mia around YTL ( 100 Billion Ytl in the state budget, the share of this tax is 1 percent). In addition, reserve requirement ratios are high, the formation of the sector to contribute more to the economy hinders the source increases the cost. In addition, other expenses, the Resource Utilization Support Fund, the expense of tax deduction of tax at the source, raising the cost of the bank, be invested in the resources can be significantly reduced, Banks ' intermediation function has a negative impact. On the other hand, in the Euro area, the average current interest rate of 2.25 around considering that real interest rates are still in the system, therefore, the source of the cost of how high it is an indisputable fact.

Basel II compliance, although it's within the scope of “Risk-based Auditing” principles of implementation started in the industry and are serious about risk management techniques as a result of the investments of the risks identified, defined, measured, monitored and partially at this stage, it is still operational risk studies during the initial phase, however, the results of risk measurement risk management function of the predictions of the banks in the process of decision-making, yet the effect is not seen. Besides, Basel II, along with developing-country banks, the credit risk for a long time to When using the standard Method, the G-10 and Eu banks, credit and operational risks intrinsic to the use of methods from developing countries before they can move on, that's capital adequacy according to comparative advantage, the G-10 banks in developing countries bank mergers, buy them to live in the form of a consolidation to be able to speed up the process.

In EU countries, the total value of shares of national income ratio of around 70%, while shares in the istanbul stock exchange total value of the national income of 27 %per cent of the capital market in our country are insufficiently developed may be due to the need of wider share ownership and real understanding of the investment banking related issues. Sector, the use of the product and the individual in terms of the diversity of EU standards is still under the model. In our country, individual loans (consumer and housing) to national income ratio at 2.4%, while in EU countries, this rate of 45%. Besides, retail banking, individual instruments and pensions total premium production, the share of national income by 1.4 % in the insurance sector is also open to development potential.

II - Conclusions and Recommendations:

As a result, only not in the scope of Eu harmonization at the same time, low-inflationary sustainable process is attained, the rate of development of every aspect of a strong and independent feeding the economy, structural problems, rapidly growing in a healthy way, transparent, contrary to the purpose of not kept in the forefront of ethical values, management quality and high level of service quality in the banking sector, the following issues are inevitable.

*Very long and tough negotiation process, it is anticipated that the sector, in particular the size and scale of the issues related to financial structure of the EU banking sector, the competition to create significant obstacles. The financial structure of the system especially in the strengthening of the assets of, advanced technology and corporate management of the company deposits with the support of/the volume of credit to be extended, increasing the pace of the loans to deposits, receivables, and debt maturity mismatch between the in the case of elimination of the sector in the process of negotiating power as compared to the process of adaptation will gain speed. Sector, although the next crisis in the period of 2002-2004 capital adequacy, liquidity, income-expense balance with the profitability ratios in the EU banking sector was on average in the process of adaptation, although such ratios in a positive development, the maintenance will grow more healthy.

*Low inflationary process, together with a fall in the real interest rate expectations in the banking insurance tax treatment and resource utilization support fund,the reserve requirement ratio and the tax rate goes in the resource sector with a view to reducing the cost of the arrangements in the Turkish Banking Sector with economic development, will support a more effective.

*The EU the banking sector will increase the chance to compete.The EU, the Basel II standards for all banks in 2007 in the planning application. Therefore, especially in the measurement of the difficulty experienced in the industry and during the initial phase of the operational risk associated with accelerated studies, audit/risk measurement the results and predictions of risk management function of banks active in the decision-making process as a continuation of the work should be of Turkish Banking system and, ultimately, with a minimum of risk to grow in a healthy way intended to be. For this purpose, the banks ' top management to all employees is detected by the adoption of risk culture the organizational culture of the implementation of the system will increase the power.

*The central Bank's disinflation process in the success of autonomous money market structure and regulatory function in the protection, exchange rate and price stability-oriented activities will continue through.

*Banking ethical value of the priority value of the precedence between these values are given with a qualified professional bankers to the system gain in the direction of banking training programs should be arranged, human capital gains at least as important as physical capital should be given.

*Capital markets; the purpose of the proper implementation by providing just not big investors, small investors through the stock exchange can invest safely should be turned into a market, the banking sector is the accumulation of capital investments to be channelled in a more taking an active role in the economic development should support, in investment banking, with the new regulations of the EU banking sector, the adaptation process should be accelerated.

*Individual use of the product and to increase the diversity of projects produced with high potential for expansion of the retail banking sector to contribute more to the development of the individual. In addition, individual pension funds in our country through the accumulation of potential savings to the system in order to acquire banks active in brokerage activities.

*The informal economy on the limitation of informal transactions, and recorded in the sector should have a central role more effectively, the ministry of Finance, in coordination with the work to prevent money laundering.

*Unfair competition in the sector, which could lead to regulations should be removed and that the legal loopholes should be eliminated.

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