Money, Banking & Finance

Currency and Foreign Exchange

The Turkish Central Bank is responsible for monetary controls, rates of interest on deposits and
exchange controls, and is responsible for the issuance of bank notes. The currency unit is the Turkish
Lira (TL) and can be found in various coin and note denominations:

Notes Coins
  • 10,000
  • 20,000
  • 50,000
  • 100,000
  • 250,000
  • 500,000
  • 1,000,000
  • 500
  • 1,000
  • 2,500
  • 5,000

The exchange regime is based on a floating rate. The lira finds its level against other currencies in
well developed and competitive spot and forward markets.


Turkey's banking sector has changed dramatically in the last decade. The number of banks, both
domestic and foreign, now total over 60. Inter-branch and interbank money transfer facilities and foreign
exchange markets operate. Secondary markets for government securities have been developed and
all Turkish banks are required to have their accounts audited by independent external auditors,
although there is some variability in the quality of reporting. Capital adequacy requirements are still less
stringent than those for West European banks, but are gradually being brought into line with
international banking standards.

Now that the Central Bank has discontinued its discount facilities, the main sources of credits for
investment are the development banks; the Turkish Industrial Development Bank (TSKB), the Turkish
Development Bank (TKB) and the commercial banking sector. TSKB concentrates on the
establishment, expansion and modernisation of private enterprises, with emphasis on export-oriented
investments. TSKB is a private bank while TKB is owned by the state. The development of specialised
banks provides an important source of medium to long-term financing in a market where credit may still be difficult to find.

Normal operating capital can be obtained from most commercial banks, provided it is taken as a
short-term facility with roll-over possibilities. Banks usually insist on establishing a credit line from
which drawings must be made to the company's current account. They also normally require full security;
apart from a mortgage, banks may also look for individual guarantees, from both the borrower and a

The demand for a variety of banking services fuelled by the internationalisation of the economy, has
triggered rapid expansion in the number of foreign banking concerns over the past few years. The
majority of banking capital has come from the United States and the Islamic countries.

Stocks and Bonds

Currently, the only stock exchange in Turkey is the Istanbul Stock Exchange (ISE), which was
relaunched in 1986. The ISE is responsible for developing and maintaining the central securities market of

The ISE is governed by a council composed of five members, the chairman of which is appointed by
the Council of Ministers. The four other members represent the four categories of ISE members;
the development banks, commercial banks, brokerage houses and dealers. It maintains a trading floor
for a broad range of financial instruments including stocks, corporate bonds, revenue sharing
certificates, government bonds and treasury bills. Only authorised member institutions and brokers are
allowed to trade on the ISE floor. There are no restrictions for foreign investors wishing to access the ISE.

The ISE is recognised as an emerging market by foreign investors and, as such, investments may
earn very good returns, although due to the instability and speculative nature inherent in any emerging
market there is a degree of risk involved. Detailed information on companies, including financial
statements, as well as volume and price data are available. In 1994 the Government introduced new tax
measures, including reduced tax rates for public companies, to encourage the development of the market.
New regulations to be introduced by the Capital Markets Board (CMB) will be aimed at
establishing greater stability and regulation in the ISE.

Currently, it is common for companies to sell only the minimum of shares to the public (15% of
issued capital), but it is expected that as the market develops and becomes recognised as a source of
finance, this will change so that there are more "public companies", as opposed to family controlled groups
with a modest proportion of their shares in public hands.

As an emerging market, the ISE is considering further developments. According to the CMB, the
ISE is ready to become involved in futures trading. Establishment of a future market will not only boost
trading volume in the stock market, but may also assist in stabilising the market. Privatisation and
new equity investment instruments such as equity based mutual funds, should also attract investors in

Since 1991 the bond market has been more liquid than the stock market, particularly in view of the
high level of government borrowing. The volume of trading in the bond exchange has only been some
75% of the stock exchange activity, although there is a larger supply of underpinning securities. The
maximum value traded in a day, as of October 1993, was US$ 116 million. Most fixed income
bonds have maturities of 1 year or less.

Factoring and Leasing

Factoring has been introduced in Turkey in the last six years as an alternative method of financing for
both local and foreign investors. It was introduced as a means of offering product differentiation and
to assist the expansion of the economy. Domestic factoring is used by companies to turn short-term
claims into cash and has created working capital for the growth of medium sized-firms. Currently,
factoring legislation is being developed.

Leasing was introduced in Turkey in 1985, but only accounts for some 2% of investment
undertaken in Turkey. Negotiations with the Turkish Treasury have begun, which may bring some flexibility into the leasing market. There is a proposal to allow flexibility in the contract period and sub-leasing.


Turkish companies are becoming aware of the potential contribution of insurance to the health of
their business and the number of insured companies is constantly on the rise. Insurance companies have
experienced annual growth rates of 30% in their business volume. The further development of the
insurance market will lead to the introduction of new products and product differentiation.

The insurance market represented only 1.08% of GDP in 1992. The insurance market is expected
to grow rapidly, as has been the trend for the past four years, given the magnitude of risks to be
covered. At the present most risks are not insured.

Turkish Gold Market

Turkey is the biggest consumer of gold in the Middle East and ranks fourth in the world. Until
1989, when the Central Bank established an Exchange Based Gold Market, the Turkish gold market was
supplied by gold. During the period between 1989 and 1993 Turkey imported US$ 7.4 billion
worth of gold and in 1993, gold imports represented some 50% of the Turkish tourism revenues.

In March 1993, the following measures were introduced by the Turkish government:

  • The Central Bank's previous monopoly over the importing of precious metals was
    abolished and banks holding gold exchange licences are now authorised to import gold into the
  • The value of gold would be determined in the free market. Previously the price of
    gold in TL terms was fixed by the Central Bank;
  • Residents in Turkey and abroad would be allowed to open gold accounts with the
    Central Bank and commercial banks.