Its sustainable profitability, strong position and full compliance constituted a brilliant look even in the harshest days of the financial turmoil, the worst financial crisis since the Great Depression. This is certainly based on the experience gained from Turkey’s domestic banking crisis in 2001.The Banking Regulation and Supervision Agency (BDDK) has only been “on stage” for a decade but has demonstrated good performance with its tight and strict policies. Banks doing business in Turkey also admire these policies, and strict, full compliance with tough regulations is now paying off for banks.
Might this young and powerful authority now be a slave of the self-confidence promoted by international applause for its aforementioned success?
There have been some recent, let’s say “radical,” changes in legislation.
If you are interested in Turkish financial regulations you might have read that a recent communiqué by the Capital Markets Board (SPK) paved the way for the issuance of corporate bonds, commercial paper and bank bills in Turkey. However, the BDDK has expressly shown its reluctance for the issuance of bills by the banks on the grounds that these bills will weaken the deposit structure within the banking system. One may also remember that one of the first applications for the issuance of bills by the bank was rejected by the BDDK without offering any reasonable explanation.
A couple of days after the first statement came the second, which basically said, “The BDDK will call director general and deputy director general candidates to be appointed to banks to Ankara and hold face-to-face interviews with them.” By doing so, the authority will be able to have a better understanding of these people including “whether they have already read the banking code or not.” In simple words, this is what the new regulation says.
Anyone who has witnessed the recent financial crisis that has just jumped to this side of the Atlantic, especially to southern Europe, to spend some time during a very hot summer, will invariably believe that regulating a market is not a bad idea at all. There comes the crucial question: Regulation to what extent?
The SPK has been expending its best efforts to establish a sound debt securities market for some time. Starting from the first days of 2009, the SPK implemented a detailed communiqué followed by two others amending the original text. These efforts, aiming at a series of innovations in Turkish financial markets, have won the approval of many, with the exception of the banking regulation authority.
It is not difficult to predict that the financial innovation is destined to fail. A debt securities market where the banks are not actively participating will lack depth, creative structures and investor confidence. By putting a barrier before the banks, the BDDK is actually damaging the potential development of the debt securities market in Turkey as a whole.
Another point I would like to raise is that the BDDK is going beyond what we have all learned to be the liberal economic system. Regulating a market is different than administering it.
What would you call an economic system in which a government authority interviews nominated general managers or vice managers of a bank? Would you call it liberal? Can one even find a similar example to the aforementioned in the liberal democracies of the civilized world, or is that again a sui generis way of interpreting such values?
Last but not least, we believe that our banking industry is more than mature and does not need such a custodial regime.
NOTE: Berk Çektir is a licensed attorney at law and available to answer questions on the legal aspects of living in Turkey. Send enquiries to b.cektir@todayszaman.com The names of the readers are disclosed only upon written approval of the sender.DISCLAIMER: The information provided here is intended to give basic legal information. You should get legal assistance from a licensed attorney at law while conducting legal transactions and not just rely on the information in this column.
