The Middle East

International ratings agencies keep a close eye on Turkey’s banking sector, given its size and importance, and the penetration of major foreign investors. Ratings movements can affect the borrowing costs of Turkish financial institutions and, at a time when Turkish banks have taken on substantial foreign debt, can be a gauge of the borrowing costs they are likely to bear.

The foreign presence in the Turkish banking market is currently undergoing a shake up, with new entrants arriving looking to expand their presence in a large and dynamic emerging market, while others are looking to pull out due to external pressures.

Turkey’s banking sector has proved resilient to both the global economic crisis and more recent fluctuations in the country’s economy. Loan growth remains fairly high by developed-market standards but has trimmed in recent years, reflecting the market’s increasing maturity as well as regulatory moves to contain credit expansion with an eye on risk profiles.