Announcement of Turkey to Continue Financial Sector Reforms on June 24, 1988

' FOR IMMEDIATE RELEASE World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.• Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 88/94 Contact: Fawzi Rihane (202) 473-2675 TURKEY TO CONTINUE FINANCIAL SECTOR REFORMS WASHINGTON, June 24, 1988 -- Turkey will pursue its medium-term program of reforms in the financial sector for the period 1988-89 with the support of a $400 million World Bank loan. The reform program will strengthen the banking system, enabling it to provide services more efficiently to a wider range of clients. The program covers actions in three key areas. The first action includes measures to increase the efficiency of mobilization and allocation of funds. The second will improve financial discipline and the health of the banking sector according to sound financial principles. Furthermore, some government-owned banks will be restructured. The third concerns measures to improve money and capital markets and includes actions aimed at increasing competition in the auction of government securities, promoting the development of the secondary market by eliminating legal restrictions and fostering the · establishment of special funds to promote foreign portfolio investment in equities. Liberalization of the financial sector will help sustain and deepen reforms in key fiscal, monetary and financial policies, banking institutions, and money and capital markets. The banking system in Turkey is the centerpiece of the financial system. There is a total of 56 banks, of which 12 are specialized public banks, 26 private domestic banks and 18 private foreign banks. Other financial institutions include insurance companies, mutual funds, the social security system, private pension funds, and the securities market. The reforms in the banking sector, initiated in 1986, were first supported by a $300 million World Bank loan approved two years ago. Total cumulative World Bank lending to Turkey has amounted to about $9.2 billion for almost 120 projects. Agriculture accounted for 19 percent of the funds lent, industry and development finance companies for 23 percent, power for 20 percent, structural and adjustment program loans for 20 percent, and 18 percent for the social sectors. The World Bank loan is for 17 years, including five years of grace, with a variable interest rate, currently 7.72 percent, linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of 0.75 percent on the undisbursed balanced. NOTE: Money figures are in U.S. dollar equivalents.