For more information on foreign exchange exposure see paragraph 12
Three investment banks have closed since late 1999 and are being liquidated.
Of the five banks left under SDIF control, two remain in operation under court injunctions, one is in the process of being sold to a foreign bank group, one will be converted into an asset management vehicle, while one taken over in November 2001 is still being prepared for sale.
Banks with a market share of 1-5 percent of total system assets are considered medium-sized, those with less than 1 percent are considered small.
Several factors contribute to the underestimation of NPLs: (a) in mid-1999 banks were given four years to provision for existing loans; (b) loan classification is still more affected by the type of collateral than by the borrower repayment capacity; (c) many banks have not yet properly classified and provided for nonperforming related party loans; and (d) the typical lag in the recognition of credit losses in an economic downturn.
The authorities will pursue claims on these owners with the full force of the law (unlimited liability) to the extent their banks are taken over by the SDIF.
Although most of the accumulated “duty losses" up until then were not formalized in the form of regular government securities and not included in government debt statistics, most of them had been included IMF’s presentation of debt numbers.
In some cases capital has been set aside but, because of tax considerations, has not yet been used to provide for the loan loss.
In privatization, Ziraat’s special role in the government payment system (i.e., in revenue collections, expenditure disbursements and cash management) will need to be considered.
In January 2001, five banks were merged with Sumerbank; one third of the balance sheet of this bank was sold to another bank in August 2001, and the remainder transferred to the SDIF for liquidation.
This measure is designed to encourage mergers—nearly one half of the remaining 20 private commercial banks have a market share below 1 percent.
As some of the new issues replaced earlier heavily discounted issues, the increase in the stock of public debt was somewhat less than this amount.