In Turkey the figure is 52 percent, and is slowly but steadily declining. If we look at the concentration issue from another standpoint, using the data for November 1998 and taking into account the total assets of the sector, 65 percent of the Turkish banking system belongs to the top 10 major banks. If we include the 20 foreign banks and branches having a share of 6 percent, and the 14 development and investment banks having a share of 5 percent, it can be seen that 76 percent of the banking system is consistent with 10 big banks, foreign and investment banks. The remaining 24 percent of the sector belongs to 30 banks. Among these banks, there are banks that are leaders in the sector, functioning properly and effectively. However, a limited number of banks have practical problems which are well  BIS Review 31/1999  2  known to us. We know all their problems. We monitor them. The existing banking laws and other elements of the legal framework do not give us full authority to address them actively and efficiently. The problem of the state owned banks is occasioned by the state budget, and its solution involves different issues. Now let me talk about risk management in the Turkish banking sector. From the standpoint of risk management, we do have well-developed methods of risk management and for supervising the risks that we undertake.
But as I mentioned earlier in connection with the need for additional principles to preserve the soundness of the system, the rapid changes of recent years, their consequences and events occurring in the international environment have underlined the importance of effective supervision. In 1997, the Bank for International Settlements (BIS) enumerated the 25 Core Principles to be used for banking supervision. The need for such principals was well understood after the financial crises in Asia and Russia. I may say that, during these events, which have been going on for several years, the majority of the Turkish banking system has gained great advantages from adopting these changes. These banks have succeeded in keeping pace with the era, especially with respect to technological innovations, strategies for risk-taking and management techniques. Besides these advances, there were some factors that damaged the system. These are: 1) High inflation. 2) High public sector borrowing requirement. 3) The lack of an efficient legal framework. In addition, the style of banks’ operations and strategies are somewhat different in a high inflation, as opposed to a normal, environment. On the one hand, banks try to sidestep the harmful effects of inflation. On the other hand, they revise their methods of overcoming uncertainty and taking risks. And more important, as the public persists in continuing to borrow, which leads eventually to crowding-out, the banks turn to the public sector as a simple method of investment.