Financial crises, banking crises and restructuring

Profitability is the reason for a company's existence, and companies live as they make profit. Banks are also profit-oriented businesses. Therefore, the profitability performance of the banks also reveals the success of the bank management. The crisis experienced in the banking sector can be defined as having problems in the operation of the markets because of the bankruptcy of one or more banks in the financial markets and spreading of this situation to the whole sector and affecting negatively the payment systems and even stopping its operation. The reasons of these crises are primarily the unstable macroeconomic structure, the inability to effectively supervise and monitor in the banking sector, the inadequacy of legal regulations, the lack of reliability in financial infrastructure such as payment systems and the lack of credit culture required for risk management. In developing countries, banks and financial institutions (insurance companies, factoring companies, leasing companies, etc.) are intermediaries that control the financial system. In a country where there is a financial crisis, the system needs to be strong enough not to be affected by this crisis. Speculative crises arise on conditions where the basic structure is weak and reserves are inadequate. The central bank of the country has an important role in getting over the crisis of the banking sector. The credibility value of the banks and especially the banking sector plays an important role in defeating the crises the banks are experience. Financial crises affecting the banking sector do not only lead to the banks working away from efficiency and productivity, but also cause deterioration in the corporate structure. As the spreading effect of the banking crises affects other sectors, the problem may influence the macroeconomic stability. In this context, the cost of the crisis is not limited to the burden of the budget and its national share of the improvement of the banking sector, but it is possible to reach larger dimensions in the real sense. The aim of this study is primarily to explain the fundamental causes of financial crises, their theories and banking sector distortions. These are the restructuring of the banks that are corrupted or bankrupt with the negative effects of the distortions on the country's economy. Keywords: Financial crisis, banking crises, restructuring