A New Barrier for the Future of Energy Market in Turkey

Abstract

The Banking Regulation and Supervision Agency (BRSA) in Turkey has implemented a risk based framework since 2006, making bold moves of resulted in a stellar increase of capital adequacy in Turkish Banking System. But the enactment of the new law for the Internal capital adequacy assessment process (ICAAP) is evaluated as being quite an early adoption. The Bank for International Settlements (BIS) points that Turkey has early-adopted the implementation recommending further discussions for a reconsideration of the target capital adequacy ratio. The banks have already found it difficult to follow up high capital adequacy especially while financing energy projects, as the Turkish Banking system is preparing for the requirements of Basel III framework. Under the new regulation, the ICAAP is expected to decrease the capital adequacy of banks in Turkey. Meanwhile, the challenge in adopting ICAAP can be an additional barrier standing in the way to the development of energy market.