With 59 commercial banks and 13 development or investment banks, and total sectoral possessions of only USD 94.7 billion at the end of1997, Turkey is over-banked. However, the sector plays less of a financial mediator role than one would expect in an economy. There are no known foreign-exchange restrictions placed on importers by the Government of Turkey, and there are no restrictions on the relocation of funds in or out of the country. Although the Turkish Lira (TL) is exchangeable, most international transactions are denominated in U.S. dollars or German marks due to these currencies’ universal reception and the continuing monetary doubt caused by Turkey’s high inflation rate. Banks are allowed to deal in foreign exchange and to scrounge and lend in foreign currencies. Foreign exchange is liberally traded and widely available. Foreign investors are free to convert and send back their Turkish Lira profits.
Customarily, Turkish corporations have fulfilled most of their financing requirements through the banking industry. Corporation/banking associations are close. Locally, commercial banks account for about 80 percent of the credits outstanding in the Turkish financial system. Nevertheless, given the continuing gap between Turkey’s wide needs and its limited internal resources, external financing of public and private project investment will be a critical factor in this and coming years. Because of high inflation and high public-spending requirements. In recent years, fixed or pegged exchange rates have been an issue in every major emerging market financial crisis. Especially in Turkey in 2000 again in 2001. Rising market countries without dowel rates including Turkey in 1998 have been able to shun such crises.
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