Influence of Capital Buffer in Turkısh Bankıng System

This paper aim to shed light the determinants of capital buffer in the Turkish Banking system solicitous about to estimate the cyclicality of capital buffer using a panel data of 87 banks during the period 1988-2009. Major source of data for analysis has been used of reports published by Banks association of Turkey. Two-step Generalized Method of Moments is implemented by using Arellano?Bond linear dynamic panel-data estimator. The study is concentrated on: i) Economic growth, ii) Aasset size, iii) Return on equity (ROE) and iv) Non-performing loans (NPL) as the determinants of capital buffer. It is analyzed and found that commercial banks including the banks under the control of Savings Deposit & Insurance Fund, undulate procyclically, while commercial banks excluding the banks under Savings Deposit and Insurance Fund, penchant to countercyclically. This analysis is noteworthy since it is parallel to (BASEL III), while structuring a countercyclical capital framework is imperative. This study is anticipated to depict shortcomings in capital adequacy guidelines with raising distinct policy implications regard to the regulation and supervision of Islamic banks in countries where both bank types co-exist.