The effects of Basel II standards to crediting SME's by banks in Turkey

In recent years, banks are accepted as main building block of the country?s economies. Various regulations are made by local and national authorities to reach banks to have more strong and stable structure. One and the most important of these regulations is Basel Capital Adequacy Standards. Basel committee founded in Basel city of Switzerland, in order to find a common solution to problems caused to fluctiations on international exchange and banking markets as a result of leaving fixed exchange rate system on 1970s and oil crisis on 1974. Basel Committee published first capital adequacy standard on 1988 to remove aplication differences in banks that operate on the international stage. But incase of complication on markets, Basel-I standards became inadequate and Basel committee published Basel II standards that regulate real economy companies and espicially Small and Medium Sized Enterprises (SMSE) along with banking sistem, besides it includes scale of market risk and operational risk along with credit risk. Credit risk measurement approaches as Standard Approach and Internal Ratings-Based Approach under Basel II Standards get important changes on evaluation of credit requests. Along with Basel II, determination of credit risk and accordingly pricing came to order, therefore distinction between risk-low risk credit became important. Different approaches applied under the Basel Capital Adequacy Standards have significant reflections on credit operations of banks. In this study, it is investigated that how the capital amount and price of credit change for different kinds of guarantees and different credit ratings in the frame of Basel I and Basel II approaches while Small and Medium Sized Enterprises (SMSE) that have an important place in Turkey economy are credited.