Vakifbank

–Authored by Todd Johnson

One of the most interesting visits we made on the Turkey trip was to VakifBank. VakifBank is the 5th largest bank in Turkey and offers a wide range of services from commercial and consumer lending, to investment banking and investment management. What I found most interesting about the visit was learning about the differences between the Turkish and American banking systems. Furthermore, I think that banking is a really good way to understand business in a foreign country.

One of the most striking contrasts to the United States was that the use of debt is not very prevalent in Turkey, whether it be individuals, businesses, or even the government. The mortgage industry is just starting to develop and many homeowners still pay cash. Our host, Mustafa Turan, indicated that this is an area with lots of growth potential. While the mortgage market is still in its infancy, consumer lending is very robust. Many consumers finance the purchase of computers, TVs, and other high-priced consumer goods. Mr. Turan said that defaults are low in the consumer lending market since the Turkish people generally have the ability and willingness to pay off their debts.

Another point of contrast with the US banking industry is that Turkish banks have higher capital requirements. Turkish banking regulators have set capital adequacy ratios at 12%, significantly higher than the minimum of 8% established by international regulators. VakifBank even exceeds the 12% set by Turkish regulators with a capital adequacy ratio near 15%. Much of the risk aversion within the Turkish banking system is in response to a banking crisis which saw a significant amount of consolidation and failures in the industry.

A very special thank you to Mr. Turan and his associates Negris Ozer and Nihan Candan for taking the time to meet with us. It was a very educational visit and I know that my classmates and I learned a great deal about VakifBank and the Turkish banking system.