Financial Stability of the Turkish Banking Sector

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BDDK Bankacılık ve Finansal Piyasalar Dergisi
Volume:2 Issue:1
Financial Stability of the Turkish Banking Sector

Financial Stability of the Turkish Banking Sector

Authors : Münür YAYLA, Alper HEKİMOĞLU, Mahmut KUTLUKAYA

Pages : 9-26

View : 50 | Download : 14

Publication Date : 2008-06-01

Article Type : Research Paper

Abstract :In the narrow sense, financial stability is defined as price stability and the soundness of financial institutions. Although this definition can be extended to cover the functioning of financial markets, asset price volatility, risk management practices of institutions, etc., financial soundness of banks is still at the center of stability concerns. In this context, several methods have been developed to measure stability in terms of a common metric. In this paper, we analyze the stability of the Turkish banking sector in the period of 2000-2006 by applying an option theory based method that allows the estimation of default probability of the sector. We conclude that stability (default probability) was the weakest (highest) in 2001 and it entered in a healthy path after 2003. Furthermore, the sector resisted strongly to the May-June turmoil of 2006. Soundness of the sector remains relatively stable following the turmoil period.
Keywords : Finansal İstikrar, Opsiyon Modeli, Temerrüt Riski, Bankacılık

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