Impacts of Basel-II criteria complience process on Türkish Banking system?s capital requirements

The purpose of this thesis is to present the new capital adequacy principles and suggestions envisaged in the New Capital Accord dated June 2004, provided by Basel Committee and to explore the possible effects on Turkish banking system. In this study, first of all, brief information about current view of Turkish Banking System and developments after the 2000 and 2001 economic crisis have been given.The main purpose of the existing, Basel I Accord, was to minimize bank failure and possible costs to be born by depositors by computing minimum capital requirements commensurate with the risks taken by the banks. However, the main criticism about the current application was that it was inadequate in measuring the ever changing risks as the financial markets became more complex everyday, OECD ?club rule?, the same credit weighting of 100% for every credit independent of the ability & capability of the obligor avoidance of risks other than market and credit risk.Upon these criticisms, Basel Committee presented a New Capital Accord consisting of ?Three Pillars?; Minimum Capital Requirements, Supervisory Review Process and Market Discipline, with the active contribution and concurrence of the sector representatives. In this study, Minimum Capital Requirements- Credit Risk principles has been thoroughly analyzed in light of the Standard and Internal Ratings Based approaches. Turkey?s Banking Regulatory and Supervisory Authority?s comments and possible applications regarding the principles are also presented with the aim of seeking the New Accord?s possible effects on capital requirement of Turkish Banking SystemAlthough Quantitative Impact Studies of Turkey?s Banking Regulatory and Supervisory Authority?s indicate that the Basel-II will have limited effect on the capital adequacy of the Turkish banking system, because of the Türkish Banking System?s structural problems, Turkey?s Banking Regulatory and Supervisory Authority must put in practice new precautions.Key Words1. Turkish Banking System2. Basel-II3. BIS4. Capital Requirement5. Risk Management