Foreign Entry in Turkey's Banking Sector, 1980-97 (original) (raw)

1999, Policy Research Working Papers

Despite high and volatile inflation, a record number of interest margin, overhead expenses, and return on assets foreign and local banks entered Turkey's banking sector (all expressed as a percentage of total assets). He finds after the country relaxed rules about bank entry and that: generally eliminated controls on interest rates and-Foreign bank ownership is related to all three financial intermediation in 1980. The country's financial performance measures. integration with the rest of the world took a big step o Foreign bank entry reduced the overhead expenses forward with the opening up of the capital account in of domestic commercial banks, strengthening profits. 1989. Capital inflows rose significantly, and the financial-Despite their small scale of operations, foreign system became increasingly linked with external markets. banks entering the sector had a strong effect on Denizer examines one dimension of liberalization: the competition. But the market could use more impact of foreign banks entering the financial sector. competition. Between 1980 and the end of 1997, 17 foreign banks o There are strong indications that foreign banks had and a number of new local banks entered the sector. a positive impact on financial and operations planning, Denizer investigates how these banks' entry into the credit analysis and marketing, and human capital. sector affected performance based on three measures: net This paper-a product of the Poverty Reduction and Economic Management Sector Unit, Europe and Central Asia Region-is part of a larger effort in the region to understand the effects of foreign bank entry in domestic financial markets. Copies of the paper are available free from the World Bank,

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