Turkish Banking System

TURKISH BANKING SYSTEM

STRENGTHS

• High liquidity
• Quite high capital ratios
• Low NPC ratios
• ADEQUATE provisioning for NPL
• Strong support by CRBT

• International standards in regulation supervision (BRSA)
• Strong correspondent banking networks which allows for convenient integration and link with global economies
• Well trained and educated staff
• High profitability
• Strong growth in GDP enables banking sector to growth further

THREATS

• Heavily depends on deposits
• ROE of investments/development banks
• Consolidation not over yet
• Domestic capital accumulation weak (new foreign entrant’s possibly.)

CAR (CAPITAL ADEQUACY RATIO)

• Globally min CAD is %8
• In turkey BRSA is asking all Turkish bank to have min CAR 12%
• BRSA is in charge of regulating Banks, leasing companies, factoring companies, consumer fiancé companies

ORGANIZATIONAL CHARACTERISTIC OF INTERNATIONAL BANKS

• Representative offices
• Bank Branch (small bank, you need license)
• Joint venture bank

• Ex: (yapı kredi)
• Subsidiary : means that management controlling shareholders majority control
• Equity investment: minority share

• Consortium Banks

Definition:  EURO $ Deposit: is a US$ deposit account established with a bank which is outside of USA

                      EURO (in a foreign country –any country outside of USA)

                     EURO Y account: opened with a bank outside of JAPAN

LIBOR:

• London interbank office rate
• Reference rate of all banking transactions
• Libor rate is established for each of convertible foreign currency and different terms

Sibor: Singapore investment offer rate

Fibor: Frankfurt investment offer rate

COMMERCIAL PAPER C/P (finansman bürosu)

Definition: it is a short term, unsecured barrowing investment which is issued by corporation which has CREDIT RATING. You many have for Credit Rating; Government Company, state bank, financial institution, real sector coup, municuplition.

CREDIT RATING: is a methodological report written by an independent expert company which measures the capacity to pay back or probability of default of barrowing institution.

RATING AGENCIES:

MOODY’S     S & P      FITCH      JCR (JAPAN CREDIT RATING)

AAA

..

2A

BBB

BB-                                               BB-(HİGH RISK cost of barrowıng)

                                                     BBB- (Minimum investment grade, very dangerous very expensive.                         TURKEY SOVEREIGN RATING  Speculative junk)

RATING RESULTS:

• Rating specified as letter (3A, 2A, A, 3B,C,…F)
• Outlook : negative stable positive

• Turkey’s grade according to Fitch is BB+
• Turkey’s outlook changed stable to negative (1 year-18 month) which means they would downgrade you
• Stable to positive means that right direction and upgrade you
• Outlook determines which direction that rate will go positive or negative.

CREDIT ENHANCEMENT

• Rating grade will be pushed up by your guarantor’s credit rating
• Banks can provide credit enhancement issuing with *letter of credit * letter of guarantee
• Insurance co-surety band for issuer * the original issuer will be paying the commission to the credit enhancement entity(bank or insurance co)

PURPOSE FOR CREATING C/P

• As a working capital instrument alternative to short term bank barrowing
• Bridge financing
• Company takes overs
• NIF: NOTE ISSUANCE FACILITY

SYNDICATED LOAN FACILITIES/SYDICATED LOANS/SENDIKASYON KREDILERI

Definition: is a financing facility made available by a consortium of banks a single barrower.

2 main characteristics:

• Distribution of risk according to a participation level
• It makes possible large amounts of loan (financing) which is not possible to be obtained from a single bank.

• TR Banks: 30 Turkish banks are barrowing from syndications market. *term 1 year *total amount (as of today) barrowed by TR Banks:-17 bn * denomination are in $and €

BANKING SECTOR

• Citibank: CEO Vikrom PANDIT resigns
• $45bn bailout by government ….expectations?
• Shareholders declined bonus payment in 04/2012

MAJOR FEES IN A TYPICAL SYMLICATED LOAN FACILITY

• Arrangement fee: mandated arrangers (ex: Citibank, JPM, Deutche)
• Management fee: underwriting fee
• Participation fee
• Legal fees: international transactionlarda legal olmak zorunda
• Commitment fee: all details are written down
• Agency fee

2 TYPES OF METHODS

• Best effort basis
• Underwritten basis

FOREING TRADE FINANCING

Letter of Credit (L/C)

Definition: is a conditional bank/payment guarantee which is issued by the importer’s bank and promises to pay the agreed amount to the seller (exporter) subject to exporter meeting specific conditions written in l/c

Parties involves is a l/c

• Importer
• Exporter
• Issuing bank
• Correspondent bank (exporter’s bank)

l/c types: * sight l/c: no time gap between shipment date and payment to the exporter.

[pic 1]

1.commercial contract

2.(assuming that importer has available credit line with his bank in Turkey) he applies for l/c issuance (instruction) to issue a l/c for euro 1 mio favour of exporter.

3. The l/c for € 1 mio is issued to the exporter through the correspondent bank

4. Correspondent bank is advising the exporter for the l/c

5. Shipping the goods

6. Exporter submits all shipping documents to correspondent bank and asks for money € 1 mio