Trends in the Banking Industry

This chapter links with Chapter 2 and looks at the evolution of Turkish banking in relation to economic developments in Turkey. The historical evolution of the modern banking sector in Turkey can be divided into seven periods. These seven phases of Turkish banking are shaped by the economic policies implemented in the country as well as developments in the global economy and financial markets.1 The first phase, which refers to the era before the declaration of the Republic of Turkey in 1923, is often called the Ottoman period. The formation of national banks to support agricultural and industrial development, together with commerce, between 1923 and 1932, constitutes the second phase. The third phase includes the establishment of state banks for special tasks, in an attempt to begin industrialization through SEEs, and dominates the years between 1932 and 1945. The fourth phase, between 1945 and 1959, saw the emergence of the private banks as a by-product of the process of shifting to a policy of industrialization by supporting the private sector. Changing once again to a mixed economy model, by implementing an import substitution policy, affected the banking sector’s structure between 1960 and 1980, which constitutes the fifth phase. An era of financial liberalization beginning in 1980 changed the shape of the banking sector and initiated the sixth phase.