The Effects of Foreign Bank Participation on the Turkish Banking System and Crisis

• Main Author: Suleyman Degirmen
• Format: Article
• Language: English
• Published: University Library System, University of Pittsburgh 2015-08-01
• Series: Journal of World-Systems Research
• Online Access: http://jwsr.pitt.edu/ojs/index.php/jwsr/article/view/404

There is an assertion that the participation of foreign banks in emerging markets is often thought to improve overall bank soundness. Therefore, if the share of foreign banks in a national banking system is large, the system will quickly overcome both financial or currency crises, and quickly recover itself. Since Turkey has been experienced mentioned crises, the aim of this study is to reveal if the assertion is valid for Turkey. Our expectation from the study using VAR method is to reach a conclusion that countries with large market share of foreign banks have safely passed the crises by virtue of foreign banks best management policies. The test results indicate that foreign banks have more positive effect for helping TBS capital structure; foreign bank participation did not cause any decline in loans and last one, after crisis, existence of foreign banks worsens TBS liquidity in interest and exchange rate shocks.