Durability of Turkish banking system sector against financial crises: Stress testing practice

This study has two main parts that consist of analyzing the Turkish Banking System.In the first part, the performance between 2002 and 2013 of Turkish Banking Sector is comparatively studied in 4 groups divided as Public, Domestic Private, Foreign and Participation Banking using the method of CAMELS analysis that is approved and used by international economicentities. The analysis deals with a period of 11 years that helps us observebest the effects of local and global crises with in the period on the sector recovery and resurgence have been observed in balance sheets of the banks under control of Banking Regulation and Supervision Agency, founded after the economiccrisis of 2001. In analysis, Local-Financed Private Banks has been the banking group with top points thanks to successful performance they showed in management quality and profitability, and strong capital structures. Public Banks rank number two with the strong capital structures and the recovery they had in their asset safter the economic crisis of 2001. Foreign Banks appeared to have a weak performance due to the effects of therise in debt follow-uprates on management quality and profitability. Due to weaker capital of Participation Banks compared to the other banking groups and the obligation to use interest-free instruments, over balance of fund transactions in their assets have been adversely affected. In the second part, durability of the Banking System against the possible risks that it could face during the economic crisis has been evaluated. Banking System has been divided into 4 main branches as Public, Local Private, Foreign and Participation Banking. Fiscal data and ratios of the year 2014 have been made use of. The analysis is made up of 3 stages, biddability ratios, liquidity ratios and the changes in the foreign exchange net general position / regulatory capital ratio have been analysed. As the basic criteria, the legal boundaries determined by the Banking Regulatory and Supervisory Agency have been taken into consideration. In the analysis, Public Banks have become the strongest banking group, while Participation Banks have been the weakestone in under the economic crisis conditions. In terms of liquidity coverage, Foreign Banks have got the best position, while Participation Banks have ranked as the weakest. Interms of Foreign Exchange Net General Position / Regulatory Capital Ratio, Foreign Banks have been the most susceptible bank to problems, while Public Banks have beent hestrongest banking groups with the strong capital and position.