Latest Global Financial Crisis and Its Effects on Turkish Finance Sector

Global financial crisis which we are going through today started with the housing loans granted by the banks or intermediary organizations (in return for low cash guarantees) to the financial intermediaries and individuals who had repayment risk, without making serious risk analysis in an environment where interest rates were quite low and it was assumed that real estate prices would never go down. Increase in low-cost loans, loose monetary and fiscal policies and rapid and sharp decrease in the housing prices triggered the financial crisis. First global financial crisis of the twenty first century has made negative impacts on the economic and financial indicators of not only many developed and developing countries but also Turkey. In the scope of the stimulus packages introduced in Turkey to mitigate the effects of the crisis, subsidies and tax cuts have been offered for the firms and consumers. At the beginning of the crisis, basic macroeconomic indicators such as stock prices, exchange rates, interest, inflation and growth rate developed positively in Turkey as of the end of 2009. Capital efficiency ratio of the banking sector - constituting 80% of the financial sector in Turkey- remained at high levels even in the crisis period, which can be deemed an indicator of the reliability of the financial sector. Strict control and supervision activities introduced after severe crises to have hit Turkey in the past keep Turkish financial sector under control. This situation has ensured a strong capital structure for the Turkish financial sector, which has enabled Turkey to be relatively less affected by the recent global financial crisis.