Towards the European Union - Impact of FDI and Technological Change on Turkish Banking

Abstract

Despite the fact that Turkey has the 17th largest economy in the world and the 6th largest economy in the European Union (EU), its financial system is still relatively small compared to most of the EU countries (State Planning Organisation, 2009). Even though increased competition has been monitored over the last decade particularly due to removal of barriers on foreign entry into the Turkish banking sector, there are still doubts on Turkey’s competitive strength with the EU countries. What is important is that financial performance of institutions has become a primary concern of investors, lenders, shareholders, and in particular to managers, in planning and controlling their activities. We believe, financial progress since the 2000-01 twin crises, enforcement of internationally accepted banking regulatory and supervisory standards, for instance Basel I and II, as well as implementation of macroeconomic reforms increased stability and trust in Turkey. We expect these developments to have positive impact on bank performances attracting foreign direct investment (FDI) to the banking sector and as a result increase transfer of know how and apllication of new technological advances.