Housing finance for conventional and Islamic banks in Turkish banking system

As it is known, the global financial crisis through 2008-2009 in the world had also affected Turkish economy. This crisis pushed Turkey to implement the macro-prudential policies to avoid potential future crises. In that respect, this thesis aims at examining the effectiveness of LTV policy in reducing systemic risk arising from property markets, and to examine if it has the same impact for conventional and Islamic banks in Turkey. For this purpose, housing finance in conventional and Islamic banks are reviewed, and impact of LTV policy in conventional and Islamic banks in Turkey is explained. Further, the relationship between the amount of housing loans and their delinquencies in conventional and Islamic banks and LTV policy is analyzed with tests of difference, Chow test and time-series regressions between the non-LTV period and LTV-period. These tests show that the response of the amount of housing loans and mortgage delinquency to LTV intervention in conventional banks is greater than in Islamic banks.