Credit risk in banking and the prospect of credit risk of Turkish banking sector

If banking could be described as an art, the name of this art would probably be "Art of Risk Management". Risk Management has become an indispensable function for banks, because of globalization, the raise in the numbers of market and diversity of banking instruments. Credit risk is traditionally the most important type of risk that banks exposed to. The aim of our thesis is to discuss what kind of risks that banks exposed to, what kind of tools banks use to hedge, mitigate and manage these risks, what kind of arrangements regulatory authorities implement and the view of credit risk of Turkish Banking Sector. In our thesis, definition of credit risk, management tools of credit risk, Basel accords, the prospect of credit risk of Turkish Banking Sector, implementation of TFRS 9 and its effects to Turkish Banking Sector are discussed. In the practice section of our thesis, financial figures of the sector of last twelve years are analyzed comparatively by using ratio analyses. We concluded that Turkish Banking Sector, thanks to strong capital composition, profitability and effective management of BDDK, could succeed to minimize negative effects of financial crisis, in spite of raising risks, financial crises and strict regulations of regulatory authorities.