Turkey : Corporate Sector Impact Assessment Report
In February 2001, Turkey was hit by its deepest economic and financial crisis since World War II, prompting a severe decline in business activity. The adverse effects of the crisis were felt throughout the economy-starting in the public sector, spr...
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| Format: | Other Financial Sector Study |
| Language: | English en_US |
| Published: |
Washington, DC
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2003/03/2185245/turkey-corporate-sector-impact-assessment-report http://hdl.handle.net/10986/14870 |
| Summary: | In February 2001, Turkey was hit by its
deepest economic and financial crisis since World War II,
prompting a severe decline in business activity. The adverse
effects of the crisis were felt throughout the
economy-starting in the public sector, spreading to the
financial sector, and, causing increasing distress in the
real sector. To restore growth and return companies to
profitability, Turkey urgently needs to implement a
comprehensive corporate restructuring program. Moreover,
simultaneous resolution efforts are needed in cases where
corporate distress is creating distress for financial
institutions. The report explores the significance and depth
of the crisis, which includes an analysis of corporate
perceptions of the crisis, and corporate distress. Several
factors will limit the ability of Turkish financial
institutions to resolve distress among corporate borrowers.
Weak insolvency and foreclosure procedures may encourage a
race to seize collateral, inhibiting orderly workouts of
non-liquid but viable companies. Small, capital-weakened
banks could be particularly nettlesome in corporate workout
negotiations. Banks need to recognize that such workouts can
reduce non-performing loans, and restore their clients'
creditworthiness. In addition, the Banking Regulation and
Supervision Agency needs to develop policies that encourage
banks to participate in voluntary workouts. Drawing on
various models worldwide, recommendations suggest:
resolution strategies to help banks and firms resolve their
"mutual hostage'' dilemma; policy changes for
the Government to facilitate resolution and attract foreign
direct investment; and, financing measures to help firms
overcome the credit crunch. Recommendations are also split
between short-term measures, and medium-term measures -
these medium-term measures are crucial because corporate
distress will likely continue well beyond the initial
macroeconomic recovery, while many of these measures, such
as facilitating foreign direct investment and improving the
management and transparency of large corporate groups, will
have long-lasting effects. |
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