Financial and Insurance Activities industry

Restructuring of the banking system

The banking crisis in 2001 was a game changer for the banking sector and the industry at large. Restructuring of the banking system through legislation and regulatory and supervisory bodies had a major impact on the industry.  The most noteworthy change in the banking system was the abandonment of unlimited deposit insurance policy, which was contemplated as one of the leading causes for reckless money depositing and lending practices. The GDP contracted by 9.5 per cent as a result of the 2001 crisis. In the aftermath, ownership of many insolvent banks, including some of the state-owned banks, were transferred to the SDIF (Savings Deposits Insurance Fund). Such banks later are acquired by large holdings or foreign groups, as restructuring efforts brought the confidence back into the system. Product and technology based competition heightened as more and more foreign investors were lured into market, which in turn helped the sector reinvent itself.  However, impressive annual economic growth, around 7 per cent on average, in the following years was not enough to cure the chronic high unemployment, inflation and current account deficit.

State Owned Enterprises' market share is 36 per cent 

Public ownership encapsulates State-Owned Enterprises (SOEs) Government involvement in network sectors, direct control over enterprises and governance of SOE’s. State owned enterprises have 36 per cent market share in the industry. Of the five state-owned banks operate in the market, Ziraat Bankasi ranks 1st, Halk Bankasi 5th and Vakifbank 7th by their asset size.

Industry globalisation level is medium to high with an upward potential

Foreign owned companies, which represent roughly 30 per cent the industry players, chose to invest in Turkey based on cost globalization drivers to maximize their exposure at global scale, minimize their costs by taking advantage of lower factors costs. The degree to which diversity of competitors in terms of their market origin, and the extent to which major players have globalized their operations known as competitive drivers also affect the globalization level of the industry.   

Competitive drivers increased in the industry as the share of foreign-owned enterprises increased and financial services are integrated with the global financial markets within the past 15 years. Lastly the government drivers such as the technical standards and regulations imposed by the government and state-owned competitors are dominant in the industry may affect the globalization level of the industry to a certain degree.

TurkAnalitik’s classification of the Financial and Insurance Activities industry’s globalization level is medium to high with an upward potential. Technological advances and free flow of capital are driving enterprises in the industry toward a more integration with the global markets.