Turkish banks seek freedom as Basel II hits capital ratios

Turkey’s banks are well placed to absorb an increase in capital requirements when the country switches to the Basel II regime this month, but larger institutions are frustrated that the modelling approaches contained in the new rules remain out of bounds. David Wigan reports

On July 1, capital ratios across the Turkish banking industry dropped an estimated 1.4 percentage points, as the country switched to the Basel II regulatory framework – a result of stricter risk-weights for certain assets, and the fact that Turkey’s banks must initially apply the standardised weights rigidly, with no freedom to adopt Basel II’s internal modelling approaches.

But this is something Turkey’s bank supervisor – the Bankacılık Düzenleme ve Denetleme Kurulu (BDDK) – expects to change