Turkish banking system becomes to adapt new conditions and this impacts to increase competition in terms of new services and products. In particular, when foreign banks are coming to Turkish market, domestic banks lag behind in respect to new modernization of their diversify products and services. Banking system makes room for different kinds of financial activities such as leasing, factoring, and trading of gold. Under these circumstances, Turkish bank has three major groups which are commercial banks, investment and development banks and also interest free banks. In addition to this, banking system can be classified into three categories which are private-owned, state-owned and foreign banks. In Turkey, there are different kinds of banks in terms of categories and also many foreign bankers prefer to establish or bring their banking system. Thanks to economic and financial reforms, these provide with positive atmosphere for growth so as to encourage many foreign bankers who enter to the sector through banking activities. Turkish banking laws strengthen the banking sector and improve the supervision standards in line with international standards such as reporting, auditing and transparency.
Financial stability shapes the structure of banking system
Financial stability plays a crucial role on policy makers during the last decade both in developed and emerging countries. As financial crises have took place repeatedly throughout history in both high and middle to low income countries. There is an important correlation between financial market and financial stability. Since the stability of financial system is significant in order to save profitable investment opportunities. Therefore, financial system has various factors which are social, legal, economic and political factors affect the stability of financial system. All factors can determine the value of system of society which in turn impacts the functioning of the financial system. Legal factors can be described as the laws and regulations which financial system involves in taxation system, regulatory and international laws. Financial system encompasses high degree of confidence which the key are stable and participants can transact in them at prices. For the purpose of financial stability is that it carries out its key functions, including saving mobilization, resource allocation, monitoring resource use, supporting the exchange of goods and services and also facilitating risk management. Why financial stability important is that the lack of financial stability can generate huge problems in the economy such as financial fragility, financial instability and financial crisis. Three items is very significant for banking sectors. In regard to this, the conduct of financial stability analysis assists the overall framework in banking system for crisis prevention and management.
Turkish government focuses on the importance of financial stability to have welfare life style in the society. Although many countries face with economic crisis, this circumstance reflects both conditions of life style for people and also economy for banking system. As a result of this, Turkish government tries to protect banking system from financial straits. In accordance with the article 29 of Banking Law No. 5411, this law focuses on the importance of obligations pertaining to internal system. The banks shall establish and operate adequate and efficient internal control, risk management and internal audit systems which are in harmony with the scope and structure of their activities so as to monitor and control the risk that they encounter. Taking everything into account, economic stability poses for the sake of society and regulations contributes to substantial financial stability.