The effects of Basel II fundamental arrangements and applications Ooer the SME?s

As a result of globalisation in the 21st century, a string of long lasting financial crises were experienced in the financial market. Research shows that, this was mosty due to the inadequacies in the risk management. This situation warrented the establishment of international standards and increasing the effectivity of the auditing mechanisms. With the suggestion that improvement in the risk management quality of the banks in the financial system would aid the stability in the financial markets, so as a result some regulations over capital adequacy in the banking sector were introduced. First of these regulation was the Basel I, followed by the Basel II capital inadequacy., regulation to remedy the shortfalls in the regulation. With the standards introduced by Basel II, it is expected that SME?s as well as the banking sector will be effected indirectly.This is the study of the effects of Basel II criterias on the Turkiye?s SME?s. A survey is carried out on 33 SME?s in Kırşehir to demonstrate the shortfalls and weaknesses in the adjustment period to Basel IIAlthough SME?s have quite big share in Turkish economy, many of the SME?s are far from being and institutional organisation. because of their family based structure. In addition to this, they lack showing their financial charts, incomes and their financial deficits. As a result of this issues it?s inevitable for these SME?s to face with certain difficulties when they apply for bank credits. The ups and downs in the financial markets and because of its sharp unmeasurable effects the Basel II is postponed for the year 2009. In the upcoming year the SME?s will try to compensate their deficiencies and their weaknesses and evantually they will meet the Basel II?s standards and they will most likely have better competition advantages compared to other SME?s .Key words: Basel II, SME, capital, adequacy, grading.