Istanbul: a Bustling City with a Regional Financial Center potency, says Turkish Bank Association study

Istanbul, Turkey | December 17, 2007 by D-8 Secretariat

If İstanbul becomes a financial center in its region, it will start earning an extra amount of up to 20 billion euros per year after 2025, a study by the Turkish Banks Association (TBB) suggested last Tuesday, as reported by the Turkish TodaysZaman newspaper.

İstanbul’s Levent district, which already hosts the headquarters of major banks, sustains its position as the financial hub.  The study was presented as a report by TBB President and İş Bankası General Manager Ersin Özince in a meeting yesterday in İstanbul. The CEOs of TBB member banks also participated in the meeting.

The report was prepared by renowned international consultancy company Deloitte and Touche after some 14 weeks of hard work. Özince said that throughout his 25-year career he had seen many people claiming that they were a part of “developing markets” and added: “We still haven’t been able to graduate from this ‘developing countries’ class, in 25 years. We don’t create the necessary opportunities to improve our shallow financial markets.

We have such a speculative market structure that it trembles severely even from the slightest fluctuations.” He said Turkey has to compose an identity which is more suitable with its power and build up. “Or else, such huge freedom of action in that kind of shallow markets would do no good for any of us.” Despite the situation’s negative appearance, however, Özince believes that there is no better country than Turkey in the region in terms of market conditions to hold the position of a financial center.

If Turkey’s “Big Apple” — a term used for New York to refer to its significance in the US economy — emerges as an economic power center for the region, foreigners will flow in its securities markets as they do in the real estate investments, Özince claimed. Interest is definitely not the only attracting element, he noted, adding that there are more important potentials for Turkey as well. As an example, he said: “The total market value of Turkey’s banks, including those of the insurance companies, is around $150 billion. That means we may issue $100 billion of notes as securities if the state allows us. We can sell $200 billion worth of notes only for mortgages. Is there any market in our region that can reach to that size, even if you add Warsaw, Milano and Dubai? But if we cannot create a port to enter into, our shareholders will take us to other ports in the future.”

Akbank General Manager Zafer Kurtul also gave a speech at the meeting and pointed to three key elements regarding İstanbul’s becoming a financial center: legal order, tax and intermediary services and Turkey’s credibility. Other important issues he cited were Turkey’s share in the international markets, its ability to provide fund inflow from other markets and the trust shown in its economy.

Garanti Bank General Manager Ergun Özen, on the other hand, drew attentions to the fact that the efforts to render İstanbul a financial center is in full accordance with the country’s project of full membership to the EU. “This will bring us closer to membership,” he said.

The Deloitte report pointed out that if İstanbul doesn’t act swiftly to rise as a focal point in its region, competitor markets will effectively become more important and outdo Turkey’s business capital. The company conducted a survey of more than 300 international financial institutions to find out that a majority of the answers to the survey showed İstanbul has great potential to create income. The barriers and possible hurdles were stipulated as legal environment of the country, financial troubles the country has, insufficient infrastructure, relatively harder doing business, etc.

The vision set out in the report suggest that the city will rise as the hegemonic power of its region in 10 years and will become one of the five most important financial centers of the world in 30 years. To set up this center, the country has to spend some 2 billion euros in the next five years. By 2025, 150,000 well-trained white collar workers will be in the financial services market, the report puts forward.

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