Effects of new basel capital accord (Basel II) on SMES' credits

In the twentieth century, there have been simultaneous financial crises in finance markets with long term effects. It is observed that, especially the financial crises experienced in 1990s have spread to world markets with spreading effect as a result of globalization. Studies made have shown that these crises were mostly a result of inefficiencies in risk management. This requires forming international standards in risk management and improvement in the efficiency of audition mechanisms. For this reason, thinking that improving risk management quality in the banks will contribute to stabilization in financial markets, capital adequacy regulations towards banking sector were formed. First, Basel I Capital Adequacy Regulation was published, and then Basel II Capital Adequacy Regulation followed this to eradicate the inadequacies of the first one. It is expected that the risk-focused approach of Basel II will indirectly effect SMEs (Small and Medium size Enterprise) besides banking sector.In this study, the effects of criteria in scope of Basel II Regulation on credit of SMEs in Turkey were examined. An application about company rating, using financial ratios of some of ISE companies, has been carried out.Although SMEs have an important share in Turkish economy, most of them continue their business unregistered, neglecting transparency principle in forming financial tables and as a family corporation ? far away from having an institutional structure. When this situation of SMEs in Turkey are taken into consideration, it is unavoidable for these enterprises to encounter some problems in getting credit from banks with the declaration of Basel II. Considering that Basel II will come into force in Turkey in 2009, SMEs that can prepare an action plan exposing their insufficiencies and weak points, and adapt to necessities of Basel II will have competitive advantage against other companies.