A joint commission from the International Monetary Fund and the World Bank is coming to Turkey next month to carry out a comprehensive assessment of the financial sector.

The commission will announce the report card of the financial sector after the third, and final, phase of the financial sector assessment program (FSAP) that was performed for Turkey last year for the first time. The first two phases were held in April and August 2006. The program is operated with the coordination of the Banking Regulation and Supervision Agency (BDDK), the central bank and the Treasury but it does not have any sanctions. The commission, which is coming at the beginning of March, will make observations in the relevant institutions of the financial sector.

The commission, which is coming at the beginning of March, will make observations at the BDDK, the Banks Association of Turkey (TBB), the Savings Deposit Insurance Fund (TMSF), the central bank, the Turkish Treasury and the Finance Ministry.

Banking circles talking about the visit said that the commission would audit the integration of the financial sector to the banking law and sub-regulations implemented two years ago. “We asked for the assessment ourselves. We trust the strength of our system but we wanted to be audited by an international body. Finally, we will be investigated in detail and see whether there is something lacking,” said one banker. The importance of the report in international credit ratings would especially ease Turkey’s borrowing chances. The report can be kept private by request but FSAP reports are usually announced to the public because of the important roles they play in global investment decisions. The US has never asked for the assessment. The FSAP assessment uses very detailed investigations to try and solve compatibility issues of the financial sector with international standards and practice. The end result is a complete picture which shows the banking system in detail.

Financial sector assessment program

The FSAP, a joint IMF and World Bank effort introduced in May 1999, aims to increase the effectiveness of efforts to promote the soundness of financial systems in member countries. Supported by experts from a range of national agencies and standard-setting bodies, work under the program seeks to identify the strengths and vulnerabilities of a country’s financial system; to determine how key sources of risk are being managed; to ascertain the sector’s developmental and technical assistance needs; and to help prioritize policy responses. Detailed assessments of observance of relevant financial sector standards and codes, which give rise to Reports on Observance of Standards and Codes (ROSCs) as a by-product, are a key component of the FSAP. The FSAP also forms the basis of Financial System Stability Assessments (FSSAs), in which IMF staff address issues of relevance to IMF surveillance, including risks to macroeconomic stability stemming from the financial sector and the capacity of the sector to absorb macroeconomic shocks. Almost all of the members of the Organization for Economic Cooperation and Development attended the FSAP studies. (http:// www.imf.org /external/ np/fsap/fsap.asp#o)