The effects of Basel II accord on Turkish and EU banking sectors

Basel Accords in banking have been the most important regulatory structures shaping and regulating global financial system since 1988. Making international financial standarts to regulate the functioning of international money and financial systems has been the common effort of developed countries in the last 20 years.Until today, all of the academic work on the effects of Basel II regulations has dealt with the effects of the criterias one by one on a single basis. Particularly, we have not found any work examining the effects of Basel II regulation as a whole and in a comparative way. For this reason, in this study, while the potential effects of Basel II regulations on Turkish Banking sector have been considered with a comprehensive point of view, at the same time those potential effects have been comparatively analyzed with the effects of Basel II rules on EU banking sector. In the study SWOT-AHP methodology has been used. Some policies and strategies have been suggested for the beneficial and correct implementation of Basel II to Turkish banking sector.According to the findings of the study, the biggest opportunity that Basel II implementation will bring to the Turkish banking sector is its helping to establish a professional and strong risk management system in the sector. The strongest effect of Basel II implementation in Turkey is capital adequacy regulations are efficient in decreasing the severity and frequency of banking crises. The weakest points of Basel II effects for Turkish banking are; Basel II capital adequacy requirements are not adequate by itself for risk management and procyclical effects of Basel II. When it comes to EU banking, the strongest effects of Basel II are much more transparency of banks? risk positions and triple protection of Basel II?s three pillar structure for the banking sector. The weakest point of Basel II?s effects on EU banking has been found as Basel II?s implementation may cause unfair competition among big scale banks and small scale banks.