Basel Accords: Lessons For Turkey

Year 2013, Volume: 2 Issue: 4, 19 - 32, 01.12.2013

Müge Karacal Emre Can İlker Arslan

Abstract

In the last two decades, the world economies have experienced severe financial crises. After every crisis “new” financial regulations were offered to prevent an upcoming one. Basel Criteria have become the milestone of these regulations regarding the banking sectors where the problems and the solutions of the financial crises have emanated. However, it is observed that the Basel Accords have not met the required measures in preventing the world economy from entering a global financial crisis in 2008. Turkish banking sector has been implementing its ownmeasures which are tighter than the Basel criteria since the financial crisis it went through in 2001 and has been growing in spite of the last financial turmoil unlike its developed country counterparts. Thus our aim is to compare the banking sectors of Turkey and 10 other OECD countries for the period 2000-2008, and try to answer whether Turkey performs better regarding risk management and whether she should adopt the Basel criteria or not. To this end, we perform a panel data estimation making use of measures such as capital adequacy ratio, liquid reserves, and non-performing loans. The results indicate that in time Turkish banking sectorgot better in handlingrisk management, but that it is more prone to risk compared to OECD countries.

Keywords

Basel accord, banking system, financial crisis, non-performing loans, Turkey.

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